ACC 557 Quiz 1 chapter 1 Solution
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ACC 557 Chapter 1
Quiz Solution
ACC 557 Week 2 Quiz 1
Solved
TRUE-FALSE STATEMENTS
1. Owners of business firms are the only
people who need accounting information.
Ans:LO1 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
2. Transactions that can be measured in
dollars and cents are recorded in the financial information system.
Ans:LO1 BT: K
Difficulty: Easy TOT: .5
min AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
3. The hiring of a new company president is an
economic event recorded by the financial information system.
Ans:LO1 BT: C
Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
4. Management of a business enterprise is the
major external user of information.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
5. Accounting communicates financial
information about a business enterprise to both internal and external users.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
6. Accounting information is used only by
external users with a financial interest in a business enterprise.
Ans:LO2 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
7. Financial statements are the major means of
communicating accounting information to interested parties.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5 min.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
8. Bookkeeping and accounting are one and the
same because the bookkeeping function includes the accounting process.
Ans:LO2 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
9. The origins of accounting are attributed to
Luca Pacioli, a famous mathematician.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
10. The study of accounting will be useful only
if a student is interested in working for a profit-oriented business firm.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
11. Private accountants are accountants who are
not employees of business enterprises.
Ans:LO2 BT:K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
12. The study of accounting is not useful for a
business career unless your career objective is to become an accountant.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
13. A working knowledge of accounting is not
relevant to a lawyer or an architect.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
14. Expressing an opinion as to the fairness of
the information presented in financial statements is a service performed by
CPAs.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
15. Accountants rely on a fundamental business
concept—ethical behavior—in reporting financial information.
Ans:LO3 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
16. The primary accounting standard-setting
body in the United States is the International Accounting Standards Board.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
17. The Financial Accounting Standards Board is
a part of the Securities and Exchange Commission.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
18. The Securities and Exchange Commission
oversees U.S. financial markets and accounting standard-setting bodies.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
19. The cost and fair value of an asset are the
same at the time of acquisition and in all subsequent periods.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
20. Even though a partnership is not a separate
legal entity, for accounting purposes the partnership affairs should be kept
separate from the personal activities of the owners.
Ans:LO5 BT: C
Difficulty; Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
21. A partnership must have more than one
owner.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
22. The economic entity assumption requires
that the activities of an entity be kept separate and distinct from the
activities of its owner and all other economic entities.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
23. The monetary unit assumption states that
transactions that can be measured in terms of money should be recorded in the
accounting records.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
24. In order to possess future service
potential, an asset must have physical substance.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
25. Owners' claims to total business assets
take precedence over the claims of creditors because owners invest assets in
the business and are liable for losses.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
26. The basic accounting equation states that
Assets = Liabilities.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
27. Accountants record both internal and
external transactions.
Ans:LO7 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
28. Internal transactions do not affect the
basic accounting equation because they are economic events that occur entirely
within one company.
Ans:LO7 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
29. The purchase of store equipment for cash
reduces stockholders’ equity by an equal amount.
Ans:LO7 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
30. The purchase of office equipment on credit
increases total assets and total liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
31. The primary purpose of the statement of
cash flows is to provide information about the cash receipts and cash payments
of a company during a period.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
32. Net income for the period is determined by
subtracting total expenses and drawings from total revenues.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
33. The
income statement is sometimes referred to as the statement of operations.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
34. A
balance sheet reports the assets and liabilities of a company for a specific
period of time.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
35. The
ending retained earnings balance is reported on both the retained earnings
statement and the balance sheet.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
36. Identifying
is the process of keeping a chronological diary of events measured in dollars
and cents.
Ans:LO1 BT: K
Difficulty: Easy TOT: .5
min. AACSB:
Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
37. Management
consulting includes examining the financial statements of companies and
expressing an opinion as to the fairness of their presentation.
Ans:LO2 BT: K
Difficulty; Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
38. Accountants do not have to worry about
issues of ethics.
Ans:LO3 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Ethics AICPA BB: Critical Thinking AICPA
FN: Reporting
39. At the time an asset is acquired,
cost and fair value should be the same.
Ans:LO4 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
40. The monetary unit assumption
requires that all dollar amounts be rounded to the nearest dollar.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
41. The basic accounting equation is in
balance when the creditor and ownership claims against the business equal the
assets.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
42. External transactions involve
economic events between the company and some other enterprise or party.
Ans:LO7 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
43. In the retained earnings statement,
revenues are listed first, followed by expenses, and net income (or net loss).
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
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MULTIPLE CHOICE QUESTIONS
44. Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
45. The process of recording transactions has
become more efficient because
a. fewer events can be quantified in financial terms.
b. computers are used in processing business events.
c. more people have been hired to record business transactions.
d. business events are recorded only at the end of the year.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
46. Communication of economic events is the
part of the accounting process that involves
a. identifying economic events.
b. quantifying transactions into dollars and cents.
c. preparing accounting reports.
d. recording and classifying information.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
47. Which of the following events cannot be
quantified into dollars and cents and recorded as an accounting transaction?
a. The appointment of a new CPA firm to perform an audit.
b. The purchase of a new computer.
c. The sale of store equipment.
d. Payment of income taxes.
Ans:LO1 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
48. The use of computers in recording business
events
a. has made the recording process more efficient.
b. does not use the same principles as manual accounting systems.
c. has greatly impacted the identification stage of the accounting
process.
d. is economical only for large businesses.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
49. The accounting process involves all of the
following except
a. identifying economic transactions that are relevant to the
business.
b. communicating financial information to users by preparing
financial reports.
c. recordingnonquantifiable economic events.
d. analyzing and interpreting financial reports.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
50. The accounting process is correctly
sequenced as
a. identification, communication, recording.
b. recording, communication, identification.
c. identification, recording, communication.
d. communication, recording, identification.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
51. Which of the following techniques are not used by accountants to interpret and
report financial information?
a. Graphs.
b. Special memos for each class of external users.
c. Charts.
d. Ratios.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
52. Accounting consists of three basic
activities which are related to economic events of an organization. These
include
a. identifying, recording, and communicating
b. identifying, calculating, and responding
c. classifying, numbering, and reporting
d. issuing, reporting, and classifying
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
53. All of the following statements are correct
except
a. Good decision-making depends on good information.
b. A vital element in communicating economic events is the
accountant's ability to analyze and interpret reported information.
c. The origins of accounting are generally attributed to Socrates, a
classical Greek philosopher, who promoted accounting as a social contract.
d. The information that a user of financial information needs depends
upon the kinds of decisions the user makes.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
54. Which of the following would not be considered an internal user of
accounting data for the GHI Company?
a. President of the company.
b. Production manager.
c. Merchandise inventory clerk.
d. President of the employees' labor union.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
55. Which of the following would not be considered an external user of
accounting data for the GHI Company?
a. Internal Revenue Service Agent.
b. Management.
c. Creditors.
d. Customers.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
56. Which of the following would not be considered internal users of
accounting data for a company?
a. The president of a company.
b. The controller of a company.
c. Creditors of a company.
d. Salesmen of the company.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
57. Which of the following is an external user
of accounting information?
a. Labor unions.
b. Finance directors.
c. Company officers.
d. Managers.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
58. Which one of the following is not an external user of accounting
information?
a. Regulatory agencies.
b. Customers.
c. Investors.
d. All of these are external users.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
59. Bookkeeping differs from accounting in that
bookkeeping primarily involves which part of the accounting process?
a. Identification.
b. Communication.
c. Recording.
d. Analysis.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
60. The origins of accounting are generally attributed to the work
of
a. Christopher Columbus.
b. Abner Doubleday.
c. Luca Pacioli.
d. Leonardo da Vinci.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
61. Financial
accounting provides economic and financial information for all of the following
except
a. creditors.
b. investors.
c. managers.
d. other external users.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
62. The final step in solving an ethical
dilemma is to
a. identify and analyze the principal elements in the situation.
b. recognize an ethical situation.
c. identify the alternatives and weigh the impact of each alternative
on stakeholders.
d. recognize the ethical issues involved.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
63. The
first step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. identify the alternatives.
c. recognize an ethical situation and the ethical issues involved.
d. weigh the impact of each alternative on various stakeholders.
Ans:LO3 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Ethics AICPA BB: Critical Thinking AICPA
FN: Reporting
64. Ethics are the standards of conduct by
which one's actions are judged as
a. right or wrong.
b. honest or dishonest.
c. fair or unfair.
d. all of these.
Ans:LO3 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Ethics AICPA BB: Critical Thinking AICPA
FN: Reporting
65. All of the following are steps in analyzing
ethics cases in financial reporting except
a. identify and analyze the principle elements in the situation.
b. contact law enforcement regarding any violations of corporate
ethics codes
c. identify the alternatives and weigh the impact of each alternative
on various stakeholders.
d. recognize an ethical situation and the ethical issues involved.
Ans:LO3 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
66. In order to increase comparability, in
recent years, the FASB and IASB have made efforts to reduce the differences
between U.S.GAAP and IFRS through a process known as
a. convergence
b. monetary unit assumption
c. the cost principle
d. the fair value principle
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
67. Martin Corporation purchased land in 2007
for $290,000. In 2013, it purchased a nearly identical parcel of land for
$460,000. In its 2013 balance sheet, Martin valued these two parcels of land at
a combined value of $920,000. By reporting the land in this manner, Martin
Corp. has violated the
a. cost principle
b. convergence
c. economic entity assumption
d. monetary unit assumption
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
68. Andre Dickinson, owner of Andre's Fine
Wines, also owns a personal residence that costs $475,000. The market value of
his residence is $625,000. During preparation of the financial statements for
Andre's Fine Wines, the accounting concept most relevant to the presentation of
Andre's home is
a. the economic entity assumption.
b. the fair value principle.
c. the monetary unit assumption.
d. convergence.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
69. Generally accepted accounting principles
are
a. income tax regulations of the Internal Revenue Service.
b. standards that indicate how to report economic events.
c. theories that are based on physical laws of the universe.
d. principles that have been proven correct by academic researchers.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
70. The
cost principle requires that when assets are acquired, they be recorded at
a. appraisal value.
b. cost.
c. market price.
d. book value.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
71. The cost of an asset and its fair value are
a. never the same.
b. the same when the asset is sold.
c. irrelevant when the asset is used by the business in its
operations.
d. the same on the date of acquisition.
Ans:LO4 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
72. The body of theory underlying accounting is
not based on
a. physical laws of nature.
b. concepts.
c. principles.
d. definitions.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
73. The private sector organization involved in
developing accounting principles is the
a. Feasible Accounting Standards Body.
b. Financial Accounting Studies Board.
c. Financial Accounting Standards Board.
d. Financial Auditors' Standards Body.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
74. The SEC and FASB are two organizations that
are primarily responsible for establishing generally accepted accounting principles.
It is true that
a. they are both governmental agencies.
b. the SEC is a private organization of accountants.
c. the SEC often mandates guidelines when no accounting principles
exist.
d. the SEC and FASB rarely cooperate in developing accounting
standards.
Ans:LO4 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
75. GAAP stands for
a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
76. Financial information that is capable of
making a difference in a decision is
a. faithfully representative.
b. relevant.
c. convergent.
d. generally accepted.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
77. The Duce Company has five plants nationwide
that cost a total of $100 million. The current fair value of the plants is $500
million. The plants will be recorded and reported as assets at
a. $100 million.
b. $600 million.
c. $400 million.
d. $500 million.
Ans:LO4 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
78. The
fair value principle is applied for
a. all assets.
b. current assets.
c. buildings.
d. investment securities.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
79. The proprietorship form of business
organization
a. must have at least three owners in most states.
b. represents the largest number of businesses in the United States.
c. combines the records of the business with the personal records of
the owner.
d. is characterized by a legal distinction between the business as an
economic unit and the owner.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
80. The economic entity assumption requires
that the activities
a. of different entities can be combined if all the entities are
corporations.
b. must be reported to the Securities and Exchange Commission.
c. of a sole proprietorship cannot be distinguished from the personal
economic events of its owners.
d. of an entity be kept separate from the activities of its owner.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
81. A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of
the business.
c. is owned by its stockholders.
d. terminates when one of its original stockholders dies.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
82. The partnership form of business
organization
a. is a separate legal entity.
b. is a common form of organization for service-type businesses.
c. enjoys an unlimited life.
d. has limited liability.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
83. Which of the following is not an advantage of the corporate form
of business organization?
a. Limited liability of stockholders
b. Transferability of ownership
c. Unlimited personal liability for stockholders
d. Unlimited life
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
84. A small neighborhood barber shop that is
operated by its owner would likely be organized as a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
Ans:LO5 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
85. John and Sam met at law school and decide
to start a small law practice after graduation. They agree to split revenues
and expenses evenly. The most common form of business organization for a
business such as this would be a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
Ans:LO5 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
86. Which of the following is true regarding
the corporate form of business organization?
a. Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than
partnerships and proprietor-ships.
c. The revenues of corporations are greater than the combined
revenues of partnerships and proprietorships.
d. Corporations are separate legal entities organized exclusively
under federal law.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
87. A basic assumption of accounting that
requires activities of an entity be kept separate from the activities of its
owner is referred to as the
a. stand alone concept.
b. monetary unit assumption.
c. corporate form of ownership.
d. economic entity assumption.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
88. Ted Leo is the proprietor (owner) of Ted's,
a retailer of golf apparel. When recording the financial transactions of Ted's,
Ted does not record an entry for a car he purchased for personal use. Ted took
out a personal loan to pay for the car. What accounting concept guides Ted's
behavior in this situation?
a. Pay back concept
b. Economic entity assumption
c. Cash basis concept
d. Monetary unit assumption
Ans:LO5 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
89. A basic assumption of accounting assumes
that the dollar is
a. unrelated to business transactions.
b. a poor measure of economic activities.
c. the common unit of measure for all business transactions.
d. useless in measuring an economic event.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
90. The
assumption that the unit of measure remains sufficiently constant over time is
part of the
a. economic entity assumption.
b. cost principle.
c. historical cost principle.
d. monetary unit assumption.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
91. Owners
enjoy limited liability in a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
92. A problem with the monetary unit assumption is
that
a. the dollar has not been stable over time.
b. the dollar has been stable over time.
c. the dollar is a common medium of exchange.
d. it is impossible to account for international transactions.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
93. The common characteristic possessed by all
assets is
a. long life.
b. great monetary value.
c. tangible nature.
d. future economic benefit.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
94. Owner's equity is best depicted by the
following:
a. Assets = Liabilities.
b. Liabilities + Assets.
c. Residual equity + Assets.
d. Assets – Liabilities.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
95. The basic accounting equation may be
expressed as
a. Assets = Equities.
b. Assets – Liabilities = Stockholders' Equity.
c. Assets = Liabilities + Stockholders' Equity.
d. all of these.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
96. Liabilities
a. are future economic benefits.
b. are existing debts and obligations.
c. possess service potential.
d. are things of value used by the business in its operation.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
97. Liabilities of a company would not include
a. notes payable.
b. accounts payable.
c. salaries and wages payable.
d. cash.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
98. Liabilities of a company are owed to
a. debtors.
b. benefactors.
c. creditors.
d. underwriters.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
99. Stockholders' equity can be described as
a. creditorship claim on total assets.
b. ownership claim on total assets.
c. benefactor's claim on total assets.
d. debtor claim on total assets.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
100. Stockholders' equity is often referred to as
a. residual equity.
b. leftovers.
c. spoils.
d. second equity.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
101. When assets are distributed to the owners
of a corporation, these distributions are termed
a. depletions.
b. consumptions.
c. dividends.
d. a credit line.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
102. A dividend is
a. adistribution of the company's earnings to its stockholders.
b. equal to liabilities minus stockholders' equity.
c. equal to assets minus stockholders' equity.
d. equal to revenues less expenses
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
103. Revenues would not result from
a. sale of merchandise.
b. issuance of common stock.
c. performance of services.
d. rental of property.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
104. Sources of increases to stockholder's
equity are
a. additional investments by owners.
b. purchases of merchandise.
c. dividends.
d. expenses.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
105. The
basic accounting equation cannot be
restated as
a. Assets – Liabilities = Stockholders' Equity.
b. Assets – Stockholders' Equity = Liabilities.
c. Stockholders' Equity + Liabilities = Assets.
d. Assets + Liabilities = Stockholders' Equity.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
106. Stockholders' equity is decreased by all of
the following except
a. sales of stock.
b. net losses.
c. expenses.
d. dividends.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
107. A net loss will result during a time period
when
a. liabilities exceed assets.
b. dividends exceed investments.
c. expenses exceed revenues.
d. revenues exceed expenses.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
108. If
total liabilities increased by $15,000 and stockholders' equity increased by $10,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $25,000 decrease
b. $5,000 decrease
c. $5,000 increase
d. $25,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
109. If
total liabilities decreased by $15,000 and stockholders' equity increased by $10,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $25,000 decrease
b. $5,000 decrease
c. $5,000 increase
d. $25,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
110. If
total liabilities decreased by $25,000 and stockholders' equity increased by $15,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $40,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $40,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
111. If
total liabilities decreased by $15,000 and stockholders' equity decreased by $10,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $25,000 decrease
b. $5,000 decrease
c. $5,000 increase
d. $25,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
112. If total liabilities increased by $17,000
during a period of time and stockholders'
equity decreased by $6,000 during the same period, then the amount and
direction (increase or decrease) of the period’s change in total assets is a(n)
a. $23,000 decrease.
b. $11,000 decrease.
c. $11,000 increase.
d. $23,000 increase.
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
113. If total assets
equal $345,000 and total stockholders' equity equal $120,000, then total
liabilities must equal
a. $465,000.
b. $225,000.
c. $120,000.
d. There is not enough information given to determine this.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
114. Which of
the following will not cause a change
in the stockholders' equity of a business?
a. An increase in prepaid expenses.
b. An increase in retained earnings.
c. The sale of common stock.
d. The declaration and payment of dividends.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
115. The
amount of stockholders' equity in a business is not affected by
a. The percentage of total assets held in cash.
b. Assets consumed in the process of earning revenues.
c. The profitability of the business.
d. The amount of dividends declared and paid to stockholders.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
116. If the
transaction causes an asset account to decrease, which of the following related
effects may occur?
a. An increase of equal amount in the common stock account.
b. An increase in a liability account.
c. An increase of equal amount in another asset account.
d. An increase in the combined total of liabilities and stockholders'
equity.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
117. The accounting equation for
Quattro Enterprises is as follows:
Assets Liabilities Stockholders'Equity
$120,000 = $60,000 + $60,000
If Quattro purchases office
equipment on account for $15,000, the accounting equation will change to
Assets Liabilties Stockholders'Equity
a. $120,000 =
$60,000 + $60,000
b. $135,000 =
$60,000 + $75,000
c. $135,000 = $67,500 + $67,500
d. $135,000 = $75,000 + $60,000
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
118. As of June 30, 2013, Actual Tigers Company
has assets of $100,000 and stockholders'
equity of $30,000. What are the liabilities for Actual Tigers Company as of
June 30, 2013?
a. $30,000
b. $70,000
c. $100,000
d. $130,000
Ans:LO7 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
119. Stockholders' equity is increased by
a. dividends.
b. revenues.
c. expenses.
d. liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
120. Stockholders' equity is decreased by
a. assets.
b. revenues.
c. expenses.
d. liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
121. If
total liabilities increased by $8,000, then
a. assets must have decreased by $8,000.
b. stockholders' equity must have
increased by $8,000.
c. assets must have increased by $8,000, or stockholders' equity must have decreased by $8,000.
d. assets and stockholders'
equity each increased by $4,000.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
122. Collection
of a $1,000 Accounts Receivable
a. increases an asset $1,000;
decreases an asset $1,000.
b. increases an asset $1,000;
decreases a liability $1,000.
c. decreases a liability $1,000;
increases stockholders' equity $1,000.
d. decreases an asset $1,000;
decreases a liability $1,000.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
123. Revenues are
a. the cost of assets consumed during the period.
b. gross increases in stockholders'
equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
124. If an individual asset is increased, then
a. there must be an equal decrease in a specific liability.
b. there must be an equal decrease in stockholders' equity.
c. there must be an equal decrease in another asset.
d. any of these is possible.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
125. If
services are rendered for credit, then
a. assets will decrease.
b. liabilities will increase.
c. stockholders' equity will increase.
d. liabilities will decrease.
Ans:LO7 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
126. If expenses are paid in cash, then
a. assets will increase.
b. liabilities will decrease.
c. stockholders' equity will increase.
d. assets will decrease.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
127. If a corporation distributes cash to its
stockholders', then
a. there has been a violation of accounting principles.
b. stockholders' equity will increase.
c. stockholders' equity will decrease.
d. there will be a new liability showing the stockholders owes money to the business.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
128. If supplies that have been purchased are
used in the course of business, then
a. a liability will increase.
b. an asset will increase.
c. stockholders' equity will decrease.
d. stockholders' equity will increase.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
129. As of December 31, 2013, Calexico Company
has assets of $37,000 and stockholders' equity of $20,000. What are the
liabilities for CalexicoCompany as of December 31, 2013?
a. $17,000.
b. $20,000.
c. $37,000.
d. $57,000.
Ans:LO7 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
130. Which of the following events is not a business transaction?
a. Issuance of stock in exchange for cash.
b. Hired employees.
c. Incurred utility expenses for the month.
d. Earned revenue for services provided.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
131. Net income results when
a. Assets > Liabilities.
b. Revenues = Expenses.
c. Revenues > Expenses.
d. Revenues < Expenses.
Ans:LO8 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
132. Retained earnings at the end of the period
is equal to
a. retained earnings at the beginning of the period plus net income
minus liabilities.
b. retained earnings at the beginning of the period plus net income
minus dividends.
c. net income.
d. assets plus liabilities.
Ans:LO8 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
133. A
balance sheet shows
a. revenues, liabilities, and stockholders' equity.
b. expenses, dividends, and stockholders' equity.
c. revenues, expenses, and dividends.
d. assets, liabilities, and stockholders' equity.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
134. An income statement
a. summarizes the changes in retained earnings for a specific period
of time.
b. reports the changes in assets,
liabilities, and stockholders' equity over a period of time.
c. reports the assets, liabilities, and stockholders' equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
135. If
the retained earnings account increases from the beginning of the year to the
end of the year, then
a. net income is less than dividends.
b. a net loss is less than dividends.
c. the company must have sold stock.
d. net income is greater than dividends.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
136. Mofro’s
Computer Repair Shop started the year with total assets of $270,000 and total
liabilities of $180,000. During the year, the business recorded $450,000 in
computer repair revenues, $270,000 in expenses, and Mofropaid dividends of
$45,000. Stockholders' equity at the end of the year was
a. $180,000.
b. $210,000.
c. $225,000.
d. $270,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
137. Mofro’s
Computer Repair Shop started the year with total assets of $270,000 and total
liabilities of $180,000. During the year, the business recorded $450,000 in
computer repair revenues, $270,000 in expenses, and Mofropaid dividends of
$45,000. The net income reported by Mofro's Computer Repair Shop for the year
was
a. $90,000.
b. $135,000.
c. $180,000.
d. $225,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
138. Mofro’s Computer Repair Shop started the
year with total assets of $270,000 and total liabilities of $180,000. During the
year, the business recorded $450,000 in computer repair revenues, $270,000 in
expenses, and Mofropaid dividends of $45,000.Mofro'sstockholders' equity
changed by what amount from the beginning of the year to the end of the year?
a. $90,000.
b. $135,000.
c. $180,000.
d. $225,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
139. The balance sheet is frequently referred to
as
a. an operating statement.
b. the statement of financial position.
c. the statement of cash flows.
d. the statement of retained earnings.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
140. The primary purpose of the
statement of cash flows is to report
a. a company's
investing transactions.
b. a company's
financing transactions.
c. information
about cash receipts and cash payments of a company.
d. the net
increase or decrease in cash.
Ans:LO8 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
141. All
of the financial statements are for a period of time except the
a. income
statement.
b. retained
earnings statement.
c. balance sheet.
d. statement of
cash flows.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
142. The ending retained earnings amount is
shown on
a. the balance
sheet only.
b. theretained
earnings statement only.
c. both the
income statement and the retained earnings statement.
d. both the
balance sheet and the retained earnings statement.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
143. Black Keys Company began the year with stockholders'equity
of $185,000. During the year, the company recorded revenues of $250,000,
expenses of $190,000, and paid dividends of $20,000. What was Black
Keys’stockholders'equity at the end of the year?
a. $185,000.
b. $225,000.
c. $245,000.
d. $265,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
144. Kennedy Company issued stock to Ed Kennedy
in exchange for his investment of $25,000 cash in the business. The company
recorded revenues of $185,000, expenses of $140,000, and had paid dividends of
$10,000. What was Kennedy's net income for the year?
a. $35,000.
b. $45,000.
c. $55,000.
d. $60,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
145. Centro-matic Company began the year with stockholders'
equity of $15,000. During the year, Centro-maticissued additional shares of
stock in exchange for cash of $21,000, recorded expenses of $60,000, and paid
dividends of $4,000. If Centro-matic’s ending stockholders' equity was $56,000,
what was the company’s revenue for the year?
a. $80,000.
b. $84,000.
c. $101,000.
d. $105,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 2.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
146. Barsuk Company began the year with stockholders'
equity of $217,000. During the year, Barsukissued stock for $294,000, recorded
expenses of $840,000, and paid dividends of $56,000. If Barsuk’s ending stockholders'
equity was $581,000, what was the company’s revenue for the year?
a. $910,000.
b. $966,000.
c. $1,204,000.
d. $1,260,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 2.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
Use the following information for questions
147–148.
Fat Possum’s Service Shop started the year
with total assets of $110,000 and total liabilities of $80,000. During the
year, the business recorded $210,000 in revenues, $140,000 in expenses, and paid
dividends of $20,000.
147. Stockholders'
equity at the end of the year was
a. $30,000.
b. $80,000.
c. $100,000.
d. $120,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
148. The
net income reported by Fat
Possum’s
Service Shop for the year was
a. $50,000.
b. $70,000.
c. $80,000.
d. $90,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
149. Misra Company
compiled the following financial information as of December 31, 2013:
Revenues $170,000
Retained earnings
(1/1/13) 30,000
Equipment 40,000
Expenses 125,000
Cash 45,000
Dividends 10,000
Supplies 5,000
Accounts payable 20,000
Accounts
receivable 35,000
Common stock 40,000
Misra’s assets on
December 31, 2013 are
a. $90,000.
b. $125,000.
c. $180,000.
d $245,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
150. Misra Company
compiled the following financial information as of December 31, 2013:
Revenues $170,000
Retained earnings
(1/1/13) 30,000
Equipment 40,000
Expenses 125,000
Cash 45,000
Dividends 10,000
Supplies 5,000
Accounts payable 20,000
Accounts
receivable 35,000
Common stock 40,000
Misra’sstockholders' equity on December 31, 2011
is
a. $45,000.
b. $70,000.
c. $105,000.
d. $125,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
151. Teamboo Company’s stockholders'
equity at the beginning of August 2013 was
$300,000. During the month, the company
earned net income of $70,000 and paid dividends of $30,000. At the end of
August 2013, what is the amount of stockholders' equity?
a. $270,000
b. $300,000
c. $330,000
d. $340,000
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
152. On January 1, 2013, Cat
Power Company reported stockholders'
equity of $470,000. During the year, the company paid dividends of $20,000. At
December 31, 2013, the amount ofstockholders' equity was $550,000. What amount of net income or net
loss would the company report for 2013?
a. Net loss of $20,000
b. Net income of $60,000
c. Net income of $80,000
d. Net income of $100,000
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
153. Stahl Consulting
started the year with total assets of $20,000 and total liabilities of $5,000.
During the year, the business recorded $16,000 in catering revenues and $10,000
in expenses. Stahlissued stock of $3,000 and paid dividends of $5,000 during
the year.The stockholders' equity at the end of the year was
a. $11,000.
b. $18,000.
c. $19,000.
d. $21,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
154. Stahl Consulting
started the year with total assets of $20,000 and total liabilities of $5,000.
During the year, the business recorded $16,000 in catering revenues and $10,000
in expenses. Stahlissued stock of $3,000 and paid dividends of $5,000 during
the year.The net income reported by Stahl Consulting for the year
was:
a. $1,000.
b. $4,000.
c. $6,000.
d. $9,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
155. Stahl Consulting
started the year with total assets of $20,000 and total liabilities of $5,000.
During the year, the business recorded $16,000 in catering revenues and $10,000
in expenses. Stahlissued stock of $3,000 and paid dividends of $5,000 during
the year.Stockholders' equity
changed by what amount from the beginning of the year to the end of the year?
a. $1,000.
b. $3,000.
c. $4,000.
d. $15,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting
156. During the year 2013, Dilego Company earned
revenues of $45,000, had expenses of $28,000, purchased assets with a cost of
$5,000 and paid dividends of $3,000. Net income for the year is
a. $9,000.
b. $12,000.
c. $14,000.
d. $17,000.
Ans:LO8 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
157. At October 1, Arcade Fire Enterprises
reported stockholders' equity of $35,000. During October, no stock was issued
and the company earned net income of $9,000. If stockholders' equityat October
31 totals $39,000, what amount of dividends werepaid during the month?
a. $0
b. $4,000
c. $5,000
d. $13,000
Ans:LO8 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
158. At October 1, Arcade Fire Enterprises
reported stockholders' equity of $36,000. During October, no stock was issued
and the company posted a net loss of $4,000. If stockholders' equity at October
31 totals $32,000, what amount of dividends werepaid during the month?
a. $0
b. $2,000
c. $4,000
d. $8,000
Ans:LO8 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
159. At October 1, Arcade FireEnterprises
reported stockholders' equity of $35,000. During October, common stock of
$2,000 was issued and the company earned net income of $7,000. If stockholders'
equity at October 31 totals $40,000, what amount of dividends werepaid during
the month?
a. $0
b. $2,000
c. $4,000
d. $5,000
Ans:LO8 BT: AN
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
160. At October 1, Arcade FireEnterprises
reported stockholders' equity of $35,000. During October, common stock of
$5,000 was issued and the company posted a net loss of $2,000. If stockholders'
equity at October 31 totals $35,000, what amount of dividends werepaid during
the month?
a. $0
b. $2,000
c. $3,000
d. $5,000
Ans:LO8 BT: AN
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a161. All of the following are services offered by
public accountants except
a. budgeting.
b. auditing.
c. tax planning.
d. consulting.
Ans:LO9 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a162. Which list below best describes the major
services performed by public accountants?
a. Bookkeeping, mergers, budgets.
b. Employee training, auditing, bookkeeping.
c. Auditing, taxation, management consulting.
d. Cost accounting, production scheduling, recruiting.
Ans:LO9 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a163. Preparing tax returns and engaging in tax
planning is performed by
a. public accountants only.
b. private accountants only.
c. both public and private accountants.
d. IRS accountants only.
Ans:LO9 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a164. A private accountant can perform many
activities in a business organization but would not work in
a. budgeting.
b. accounting information systems.
c. external auditing.
d. tax accounting.
Ans:LO9 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
165. Which
of the following is not part of the
accounting process?
a. Recording
b. Identifying
c. Financial decision making
d. Communicating
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
166. The first part of the accounting process is
a. communicating.
b. identifying.
c. processing.
d. recording.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
167. Keeping a systematic, chronological diary
of events that are measured in dollars and cents is called
a. communicating.
b. identifying.
c. processing.
d. recording.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
168. Auditing is
a. the examination of financial statements by a CPA in order to
express an opinion on their fairness.
b. a part of accounting that involves only recording of economic
events.
c. an area of accounting that involves such activities as cost
accounting, budgeting, and accounting information systems.
d. conducted by the Securities and Exchange Commission to ensure that
registered financial statements are presented fairly.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
169. Internal users of accounting information
include all of the following except
a. company officers.
b. investors.
c. marketing managers.
d. production supervisors.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
170. The
organization(s) primarily responsible for establishing generally accepted
accounting principles is(are) the
FASB SEC
a. no no
b. yes no
c. no yes
d. yes yes
Ans: S04 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
171. The primary accounting standard-setting
body in the United States is the
a. Financial Accounting Standards Board.
b. International Accounting Standards Board.
c. Internal Revenue Service.
d. Securities and Exchange Commission.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
172. A proprietorship is a business
a. owned by one person.
b. owned by two or more persons.
c. organized as a separate legal entity under state corporation law.
d. owned by a governmental agency.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
173. A net loss will result during a time
period when
a. assets exceed liabilities.
b. assets exceed stockholders' equity.
c. expenses exceed revenues.
d. revenues exceed expenses.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
174. Bright Eyes Downtown Diner received
a bill of $600 from the Jronand Wine Advertising Agency. The owner, A. A. Bondy,
is postponing payment of the bill until a later date. The effect on specific
items in the basic accounting equation is
a. a decrease in Cash and an increase in Accounts Payable.
b. a decrease in Cash and an increase in Retained Earnings.
c. an increase in Accounts Payable and a decrease in Retained
Earnings.
d. a decrease in Accounts Payable and an increase in Retained
Earnings.
Ans:LO7 BT: C
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
175. Matador Company purchases $1,300 of
equipment from Danger Mouse Inc. for cash. The effect on the components of the
basic accounting equation of Matador Company is
a. an increase in assets and liabilities.
b. a decrease in assets and liabilities.
c. no change in total assets.
d. an increase in assets and a decrease in liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
176. Druganaut Company buys a $21,000 van
on credit. The transaction will affect the
a. income statement only.
b. balance sheet only.
c. income statement and retained earnings statement only.
d. income statement, retained earnings statement, and balance sheet.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
177. The financial statement that
summarizes the financial position of a company is the
a. income statement.
b. balance sheet.
c. operating statement.
d. retained earnings statement.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
Answers to Multiple Choice Questions
|
Item
|
Ans.
|
Item
|
Ans.
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Item
|
Ans.
|
Item
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Item
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Ans.
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Item
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Ans.
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Item
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Ans.
|
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44.
|
c
|
64.
|
d
|
84.
|
d
|
104.
|
a
|
124.
|
c
|
144.
|
b
|
a164.
|
c
|
|
45.
|
b
|
65.
|
b
|
85.
|
b
|
105.
|
d
|
125.
|
c
|
145.
|
b
|
165.
|
c
|
|
46.
|
c
|
66.
|
a
|
86.
|
c
|
106.
|
a
|
126.
|
d
|
146.
|
b
|
166.
|
b
|
|
47.
|
a
|
67.
|
a
|
87.
|
d
|
107.
|
c
|
127.
|
c
|
147.
|
b
|
167.
|
d
|
|
48.
|
a
|
68.
|
a
|
88.
|
b
|
108.
|
d
|
128.
|
c
|
148.
|
b
|
168.
|
a
|
|
49.
|
c
|
69.
|
b
|
89.
|
c
|
109.
|
b
|
129.
|
a
|
149.
|
b
|
169.
|
b
|
|
50.
|
c
|
70.
|
b
|
90.
|
d
|
110.
|
b
|
130.
|
b
|
150.
|
c
|
170.
|
d
|
|
51.
|
b
|
71.
|
d
|
91.
|
c
|
111.
|
a
|
131.
|
c
|
151.
|
d
|
171.
|
a
|
|
52.
|
a
|
72.
|
a
|
92.
|
a
|
112.
|
c
|
132.
|
b
|
152.
|
d
|
172.
|
a
|
|
53.
|
c
|
73.
|
c
|
93.
|
d
|
113.
|
b
|
133.
|
d
|
153.
|
c
|
173.
|
c
|
|
54.
|
d
|
74.
|
c
|
94.
|
d
|
114.
|
a
|
134.
|
d
|
154.
|
c
|
174.
|
c
|
|
55.
|
b
|
75.
|
b
|
95.
|
d
|
115.
|
a
|
135.
|
d
|
155.
|
c
|
175.
|
c
|
|
56.
|
c
|
76.
|
b
|
96.
|
b
|
116.
|
c
|
136.
|
c
|
156.
|
d
|
176.
|
b
|
|
57.
|
a
|
77.
|
a
|
97.
|
d
|
117.
|
d
|
137.
|
c
|
157.
|
c
|
177.
|
b
|
|
58.
|
d
|
78.
|
d
|
98.
|
c
|
118.
|
b
|
138.
|
b
|
158.
|
a
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|
|
|
59.
|
c
|
79.
|
b
|
99.
|
b
|
119.
|
b
|
139.
|
b
|
159.
|
c
|
|
|
|
60.
|
c
|
80.
|
d
|
100.
|
a
|
120.
|
c
|
140.
|
c
|
160.
|
c
|
|
|
|
61.
|
c
|
81.
|
c
|
101.
|
c
|
121.
|
c
|
141.
|
c
|
a161.
|
a
|
|
|
|
62.
|
c
|
82.
|
b
|
102.
|
a
|
122.
|
a
|
142.
|
d
|
a162.
|
c
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|
63.
|
c
|
83.
|
c
|
103.
|
b
|
123.
|
b
|
143.
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b
|
a163.
|
c
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|
|
Answers to Completion Statements
229. records,
communicates 234. cost
230. bookkeeping,
accounting 235. economic entity
231. auditing,
taxation, consulting 236. stockholders' equity
232. private
(or managerial) 237. reduce
233. generally
accepted accounting principles 238. balance sheet
LO1-8 BT: K Difficulty: Easy TOT: 5 min.
AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
IFRS QUESTIONS
246. Which of the following is not a
reason one set of international accounting standards are needed?
a. multinational corporations.
b. mergers and acquisitions.
c. information technology.
d. all of the above are reasons one set of international
accounting standards are needed.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
247. Which of the following is not a
reason one set of international accounting standards are needed?
a. multinational corporations.
b. financial markets.
c. information technology.
d. all of the above are reasons one set of international
accounting standards are needed.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
248. International standards are referred
to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
249. U.S. standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
250. International standards are developed
by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
251. U.S. standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
252. The United States and the
international standard-setting environment are primarily driven by meeting the needs
of
a. investors and creditors.
b. tax authorities.
c. central government planners.
d. academic researchers.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
253. The internal control standards
applicable to Sarbanes-Oxley apply to
a. all U.S. and international companies.
b. U.S. and international companies listed on U.S. exchanges.
c. International companies listed on U.S. exchanges.
d. U.S. companies listed on U.S. exchanges.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
254. The concern about international
companies adopting SOX-type standards centers on
a. cost-benefit analysis.
b. ethics issues.
c. the governing authorities.
d. comparability.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
255. Financial accounting ethics
violations are
a. not a problem in the U.S. or internationally.
b. much more common in the U.S. than internationally.
c. much more common internationally than in the U.S.
d. a major problem both in the U.S. and internationally.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
256. IFRS, compared to GAAP, tends to be
more
a. detailed.
b. rules-based.
c. principles-based.
d. full of disclosure requirements.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
257. GAAP, compared to IFRS, tends to be
more
a. simple in accounting requirements.
b. rules-based.
c. principles-based.
d. simple in disclosure requirements.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
258. Proprietorships, partnerships, and
corporations
a. are the three most common forms of business organizations in the
U.S.
b. are the three most common forms of business organizations
internationally.
c. are used in different proportions in different countries.
d. all of the above are true.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
259. The conceptual framework that
underlies IFRS
a. is very similar to that used to develop GAAP.
b. does not define assets or liabilities.
c. does not define equity.
d. does not define income or expenses.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
ACC 557 Quiz 1 chapter 1 Solution
Follow the link Below to purchase Quiz Solution
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ACC 557 Chapter 1
Quiz Solution
ACC 557 Week 2 Quiz 1
Solved
TRUE-FALSE STATEMENTS
1. Owners of business firms are the only
people who need accounting information.
Ans:LO1 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
2. Transactions that can be measured in
dollars and cents are recorded in the financial information system.
Ans:LO1 BT: K
Difficulty: Easy TOT: .5
min AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
3. The hiring of a new company president is an
economic event recorded by the financial information system.
Ans:LO1 BT: C
Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
4. Management of a business enterprise is the
major external user of information.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
5. Accounting communicates financial
information about a business enterprise to both internal and external users.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
6. Accounting information is used only by
external users with a financial interest in a business enterprise.
Ans:LO2 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
7. Financial statements are the major means of
communicating accounting information to interested parties.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5 min.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
8. Bookkeeping and accounting are one and the
same because the bookkeeping function includes the accounting process.
Ans:LO2 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
9. The origins of accounting are attributed to
Luca Pacioli, a famous mathematician.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
10. The study of accounting will be useful only
if a student is interested in working for a profit-oriented business firm.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
11. Private accountants are accountants who are
not employees of business enterprises.
Ans:LO2 BT:K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
12. The study of accounting is not useful for a
business career unless your career objective is to become an accountant.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
13. A working knowledge of accounting is not
relevant to a lawyer or an architect.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
14. Expressing an opinion as to the fairness of
the information presented in financial statements is a service performed by
CPAs.
Ans:LO2 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
15. Accountants rely on a fundamental business
concept—ethical behavior—in reporting financial information.
Ans:LO3 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
16. The primary accounting standard-setting
body in the United States is the International Accounting Standards Board.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
17. The Financial Accounting Standards Board is
a part of the Securities and Exchange Commission.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
18. The Securities and Exchange Commission
oversees U.S. financial markets and accounting standard-setting bodies.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
19. The cost and fair value of an asset are the
same at the time of acquisition and in all subsequent periods.
Ans:LO4 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
20. Even though a partnership is not a separate
legal entity, for accounting purposes the partnership affairs should be kept
separate from the personal activities of the owners.
Ans:LO5 BT: C
Difficulty; Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
21. A partnership must have more than one
owner.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
22. The economic entity assumption requires
that the activities of an entity be kept separate and distinct from the
activities of its owner and all other economic entities.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
23. The monetary unit assumption states that
transactions that can be measured in terms of money should be recorded in the
accounting records.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
24. In order to possess future service
potential, an asset must have physical substance.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
25. Owners' claims to total business assets
take precedence over the claims of creditors because owners invest assets in
the business and are liable for losses.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
26. The basic accounting equation states that
Assets = Liabilities.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
27. Accountants record both internal and
external transactions.
Ans:LO7 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
28. Internal transactions do not affect the
basic accounting equation because they are economic events that occur entirely
within one company.
Ans:LO7 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
29. The purchase of store equipment for cash
reduces stockholders’ equity by an equal amount.
Ans:LO7 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
30. The purchase of office equipment on credit
increases total assets and total liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
31. The primary purpose of the statement of
cash flows is to provide information about the cash receipts and cash payments
of a company during a period.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
32. Net income for the period is determined by
subtracting total expenses and drawings from total revenues.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
33. The
income statement is sometimes referred to as the statement of operations.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
34. A
balance sheet reports the assets and liabilities of a company for a specific
period of time.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
35. The
ending retained earnings balance is reported on both the retained earnings
statement and the balance sheet.
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
36. Identifying
is the process of keeping a chronological diary of events measured in dollars
and cents.
Ans:LO1 BT: K
Difficulty: Easy TOT: .5
min. AACSB:
Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
37. Management
consulting includes examining the financial statements of companies and
expressing an opinion as to the fairness of their presentation.
Ans:LO2 BT: K
Difficulty; Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
38. Accountants do not have to worry about
issues of ethics.
Ans:LO3 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Ethics AICPA BB: Critical Thinking AICPA
FN: Reporting
39. At the time an asset is acquired,
cost and fair value should be the same.
Ans:LO4 BT: C
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
40. The monetary unit assumption
requires that all dollar amounts be rounded to the nearest dollar.
Ans:LO5 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
41. The basic accounting equation is in
balance when the creditor and ownership claims against the business equal the
assets.
Ans:LO6 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
42. External transactions involve
economic events between the company and some other enterprise or party.
Ans:LO7 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
43. In the retained earnings statement,
revenues are listed first, followed by expenses, and net income (or net loss).
Ans:LO8 BT: K
Difficulty: Easy TOT: .5
min. AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA
FN: Reporting
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MULTIPLE CHOICE QUESTIONS
44. Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
45. The process of recording transactions has
become more efficient because
a. fewer events can be quantified in financial terms.
b. computers are used in processing business events.
c. more people have been hired to record business transactions.
d. business events are recorded only at the end of the year.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
46. Communication of economic events is the
part of the accounting process that involves
a. identifying economic events.
b. quantifying transactions into dollars and cents.
c. preparing accounting reports.
d. recording and classifying information.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
47. Which of the following events cannot be
quantified into dollars and cents and recorded as an accounting transaction?
a. The appointment of a new CPA firm to perform an audit.
b. The purchase of a new computer.
c. The sale of store equipment.
d. Payment of income taxes.
Ans:LO1 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
48. The use of computers in recording business
events
a. has made the recording process more efficient.
b. does not use the same principles as manual accounting systems.
c. has greatly impacted the identification stage of the accounting
process.
d. is economical only for large businesses.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
49. The accounting process involves all of the
following except
a. identifying economic transactions that are relevant to the
business.
b. communicating financial information to users by preparing
financial reports.
c. recordingnonquantifiable economic events.
d. analyzing and interpreting financial reports.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
50. The accounting process is correctly
sequenced as
a. identification, communication, recording.
b. recording, communication, identification.
c. identification, recording, communication.
d. communication, recording, identification.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
51. Which of the following techniques are not used by accountants to interpret and
report financial information?
a. Graphs.
b. Special memos for each class of external users.
c. Charts.
d. Ratios.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
52. Accounting consists of three basic
activities which are related to economic events of an organization. These
include
a. identifying, recording, and communicating
b. identifying, calculating, and responding
c. classifying, numbering, and reporting
d. issuing, reporting, and classifying
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
53. All of the following statements are correct
except
a. Good decision-making depends on good information.
b. A vital element in communicating economic events is the
accountant's ability to analyze and interpret reported information.
c. The origins of accounting are generally attributed to Socrates, a
classical Greek philosopher, who promoted accounting as a social contract.
d. The information that a user of financial information needs depends
upon the kinds of decisions the user makes.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
54. Which of the following would not be considered an internal user of
accounting data for the GHI Company?
a. President of the company.
b. Production manager.
c. Merchandise inventory clerk.
d. President of the employees' labor union.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
55. Which of the following would not be considered an external user of
accounting data for the GHI Company?
a. Internal Revenue Service Agent.
b. Management.
c. Creditors.
d. Customers.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
56. Which of the following would not be considered internal users of
accounting data for a company?
a. The president of a company.
b. The controller of a company.
c. Creditors of a company.
d. Salesmen of the company.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
57. Which of the following is an external user
of accounting information?
a. Labor unions.
b. Finance directors.
c. Company officers.
d. Managers.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
58. Which one of the following is not an external user of accounting
information?
a. Regulatory agencies.
b. Customers.
c. Investors.
d. All of these are external users.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
59. Bookkeeping differs from accounting in that
bookkeeping primarily involves which part of the accounting process?
a. Identification.
b. Communication.
c. Recording.
d. Analysis.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
60. The origins of accounting are generally attributed to the work
of
a. Christopher Columbus.
b. Abner Doubleday.
c. Luca Pacioli.
d. Leonardo da Vinci.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
61. Financial
accounting provides economic and financial information for all of the following
except
a. creditors.
b. investors.
c. managers.
d. other external users.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
62. The final step in solving an ethical
dilemma is to
a. identify and analyze the principal elements in the situation.
b. recognize an ethical situation.
c. identify the alternatives and weigh the impact of each alternative
on stakeholders.
d. recognize the ethical issues involved.
Ans:LO2 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
63. The
first step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. identify the alternatives.
c. recognize an ethical situation and the ethical issues involved.
d. weigh the impact of each alternative on various stakeholders.
Ans:LO3 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Ethics AICPA BB: Critical Thinking AICPA
FN: Reporting
64. Ethics are the standards of conduct by
which one's actions are judged as
a. right or wrong.
b. honest or dishonest.
c. fair or unfair.
d. all of these.
Ans:LO3 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Ethics AICPA BB: Critical Thinking AICPA
FN: Reporting
65. All of the following are steps in analyzing
ethics cases in financial reporting except
a. identify and analyze the principle elements in the situation.
b. contact law enforcement regarding any violations of corporate
ethics codes
c. identify the alternatives and weigh the impact of each alternative
on various stakeholders.
d. recognize an ethical situation and the ethical issues involved.
Ans:LO3 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
66. In order to increase comparability, in
recent years, the FASB and IASB have made efforts to reduce the differences
between U.S.GAAP and IFRS through a process known as
a. convergence
b. monetary unit assumption
c. the cost principle
d. the fair value principle
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
67. Martin Corporation purchased land in 2007
for $290,000. In 2013, it purchased a nearly identical parcel of land for
$460,000. In its 2013 balance sheet, Martin valued these two parcels of land at
a combined value of $920,000. By reporting the land in this manner, Martin
Corp. has violated the
a. cost principle
b. convergence
c. economic entity assumption
d. monetary unit assumption
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
68. Andre Dickinson, owner of Andre's Fine
Wines, also owns a personal residence that costs $475,000. The market value of
his residence is $625,000. During preparation of the financial statements for
Andre's Fine Wines, the accounting concept most relevant to the presentation of
Andre's home is
a. the economic entity assumption.
b. the fair value principle.
c. the monetary unit assumption.
d. convergence.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
69. Generally accepted accounting principles
are
a. income tax regulations of the Internal Revenue Service.
b. standards that indicate how to report economic events.
c. theories that are based on physical laws of the universe.
d. principles that have been proven correct by academic researchers.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
70. The
cost principle requires that when assets are acquired, they be recorded at
a. appraisal value.
b. cost.
c. market price.
d. book value.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
71. The cost of an asset and its fair value are
a. never the same.
b. the same when the asset is sold.
c. irrelevant when the asset is used by the business in its
operations.
d. the same on the date of acquisition.
Ans:LO4 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
72. The body of theory underlying accounting is
not based on
a. physical laws of nature.
b. concepts.
c. principles.
d. definitions.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
73. The private sector organization involved in
developing accounting principles is the
a. Feasible Accounting Standards Body.
b. Financial Accounting Studies Board.
c. Financial Accounting Standards Board.
d. Financial Auditors' Standards Body.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
74. The SEC and FASB are two organizations that
are primarily responsible for establishing generally accepted accounting principles.
It is true that
a. they are both governmental agencies.
b. the SEC is a private organization of accountants.
c. the SEC often mandates guidelines when no accounting principles
exist.
d. the SEC and FASB rarely cooperate in developing accounting
standards.
Ans:LO4 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
75. GAAP stands for
a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
76. Financial information that is capable of
making a difference in a decision is
a. faithfully representative.
b. relevant.
c. convergent.
d. generally accepted.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
77. The Duce Company has five plants nationwide
that cost a total of $100 million. The current fair value of the plants is $500
million. The plants will be recorded and reported as assets at
a. $100 million.
b. $600 million.
c. $400 million.
d. $500 million.
Ans:LO4 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
78. The
fair value principle is applied for
a. all assets.
b. current assets.
c. buildings.
d. investment securities.
Ans:LO4 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
79. The proprietorship form of business
organization
a. must have at least three owners in most states.
b. represents the largest number of businesses in the United States.
c. combines the records of the business with the personal records of
the owner.
d. is characterized by a legal distinction between the business as an
economic unit and the owner.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
80. The economic entity assumption requires
that the activities
a. of different entities can be combined if all the entities are
corporations.
b. must be reported to the Securities and Exchange Commission.
c. of a sole proprietorship cannot be distinguished from the personal
economic events of its owners.
d. of an entity be kept separate from the activities of its owner.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
81. A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of
the business.
c. is owned by its stockholders.
d. terminates when one of its original stockholders dies.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
82. The partnership form of business
organization
a. is a separate legal entity.
b. is a common form of organization for service-type businesses.
c. enjoys an unlimited life.
d. has limited liability.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
83. Which of the following is not an advantage of the corporate form
of business organization?
a. Limited liability of stockholders
b. Transferability of ownership
c. Unlimited personal liability for stockholders
d. Unlimited life
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
84. A small neighborhood barber shop that is
operated by its owner would likely be organized as a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
Ans:LO5 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
85. John and Sam met at law school and decide
to start a small law practice after graduation. They agree to split revenues
and expenses evenly. The most common form of business organization for a
business such as this would be a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
Ans:LO5 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
86. Which of the following is true regarding
the corporate form of business organization?
a. Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than
partnerships and proprietor-ships.
c. The revenues of corporations are greater than the combined
revenues of partnerships and proprietorships.
d. Corporations are separate legal entities organized exclusively
under federal law.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
87. A basic assumption of accounting that
requires activities of an entity be kept separate from the activities of its
owner is referred to as the
a. stand alone concept.
b. monetary unit assumption.
c. corporate form of ownership.
d. economic entity assumption.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
88. Ted Leo is the proprietor (owner) of Ted's,
a retailer of golf apparel. When recording the financial transactions of Ted's,
Ted does not record an entry for a car he purchased for personal use. Ted took
out a personal loan to pay for the car. What accounting concept guides Ted's
behavior in this situation?
a. Pay back concept
b. Economic entity assumption
c. Cash basis concept
d. Monetary unit assumption
Ans:LO5 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
89. A basic assumption of accounting assumes
that the dollar is
a. unrelated to business transactions.
b. a poor measure of economic activities.
c. the common unit of measure for all business transactions.
d. useless in measuring an economic event.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
90. The
assumption that the unit of measure remains sufficiently constant over time is
part of the
a. economic entity assumption.
b. cost principle.
c. historical cost principle.
d. monetary unit assumption.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
91. Owners
enjoy limited liability in a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
92. A problem with the monetary unit assumption is
that
a. the dollar has not been stable over time.
b. the dollar has been stable over time.
c. the dollar is a common medium of exchange.
d. it is impossible to account for international transactions.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
93. The common characteristic possessed by all
assets is
a. long life.
b. great monetary value.
c. tangible nature.
d. future economic benefit.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
94. Owner's equity is best depicted by the
following:
a. Assets = Liabilities.
b. Liabilities + Assets.
c. Residual equity + Assets.
d. Assets – Liabilities.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
95. The basic accounting equation may be
expressed as
a. Assets = Equities.
b. Assets – Liabilities = Stockholders' Equity.
c. Assets = Liabilities + Stockholders' Equity.
d. all of these.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
96. Liabilities
a. are future economic benefits.
b. are existing debts and obligations.
c. possess service potential.
d. are things of value used by the business in its operation.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
97. Liabilities of a company would not include
a. notes payable.
b. accounts payable.
c. salaries and wages payable.
d. cash.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
98. Liabilities of a company are owed to
a. debtors.
b. benefactors.
c. creditors.
d. underwriters.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
99. Stockholders' equity can be described as
a. creditorship claim on total assets.
b. ownership claim on total assets.
c. benefactor's claim on total assets.
d. debtor claim on total assets.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
100. Stockholders' equity is often referred to as
a. residual equity.
b. leftovers.
c. spoils.
d. second equity.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
101. When assets are distributed to the owners
of a corporation, these distributions are termed
a. depletions.
b. consumptions.
c. dividends.
d. a credit line.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
102. A dividend is
a. adistribution of the company's earnings to its stockholders.
b. equal to liabilities minus stockholders' equity.
c. equal to assets minus stockholders' equity.
d. equal to revenues less expenses
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
103. Revenues would not result from
a. sale of merchandise.
b. issuance of common stock.
c. performance of services.
d. rental of property.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
104. Sources of increases to stockholder's
equity are
a. additional investments by owners.
b. purchases of merchandise.
c. dividends.
d. expenses.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
105. The
basic accounting equation cannot be
restated as
a. Assets – Liabilities = Stockholders' Equity.
b. Assets – Stockholders' Equity = Liabilities.
c. Stockholders' Equity + Liabilities = Assets.
d. Assets + Liabilities = Stockholders' Equity.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
106. Stockholders' equity is decreased by all of
the following except
a. sales of stock.
b. net losses.
c. expenses.
d. dividends.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
107. A net loss will result during a time period
when
a. liabilities exceed assets.
b. dividends exceed investments.
c. expenses exceed revenues.
d. revenues exceed expenses.
Ans:LO6 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
108. If
total liabilities increased by $15,000 and stockholders' equity increased by $10,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $25,000 decrease
b. $5,000 decrease
c. $5,000 increase
d. $25,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
109. If
total liabilities decreased by $15,000 and stockholders' equity increased by $10,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $25,000 decrease
b. $5,000 decrease
c. $5,000 increase
d. $25,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
110. If
total liabilities decreased by $25,000 and stockholders' equity increased by $15,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $40,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $40,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
111. If
total liabilities decreased by $15,000 and stockholders' equity decreased by $10,000 during a period of time, then total assets
must change by what amount and direction during that same period?
a. $25,000 decrease
b. $5,000 decrease
c. $5,000 increase
d. $25,000 increase
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
112. If total liabilities increased by $17,000
during a period of time and stockholders'
equity decreased by $6,000 during the same period, then the amount and
direction (increase or decrease) of the period’s change in total assets is a(n)
a. $23,000 decrease.
b. $11,000 decrease.
c. $11,000 increase.
d. $23,000 increase.
Ans:LO6 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
113. If total assets
equal $345,000 and total stockholders' equity equal $120,000, then total
liabilities must equal
a. $465,000.
b. $225,000.
c. $120,000.
d. There is not enough information given to determine this.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
114. Which of
the following will not cause a change
in the stockholders' equity of a business?
a. An increase in prepaid expenses.
b. An increase in retained earnings.
c. The sale of common stock.
d. The declaration and payment of dividends.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
115. The
amount of stockholders' equity in a business is not affected by
a. The percentage of total assets held in cash.
b. Assets consumed in the process of earning revenues.
c. The profitability of the business.
d. The amount of dividends declared and paid to stockholders.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
116. If the
transaction causes an asset account to decrease, which of the following related
effects may occur?
a. An increase of equal amount in the common stock account.
b. An increase in a liability account.
c. An increase of equal amount in another asset account.
d. An increase in the combined total of liabilities and stockholders'
equity.
Ans:LO6 BT: k
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
117. The accounting equation for
Quattro Enterprises is as follows:
Assets Liabilities Stockholders'Equity
$120,000 = $60,000 + $60,000
If Quattro purchases office
equipment on account for $15,000, the accounting equation will change to
Assets Liabilties Stockholders'Equity
a. $120,000 =
$60,000 + $60,000
b. $135,000 =
$60,000 + $75,000
c. $135,000 = $67,500 + $67,500
d. $135,000 = $75,000 + $60,000
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
118. As of June 30, 2013, Actual Tigers Company
has assets of $100,000 and stockholders'
equity of $30,000. What are the liabilities for Actual Tigers Company as of
June 30, 2013?
a. $30,000
b. $70,000
c. $100,000
d. $130,000
Ans:LO7 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
119. Stockholders' equity is increased by
a. dividends.
b. revenues.
c. expenses.
d. liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
120. Stockholders' equity is decreased by
a. assets.
b. revenues.
c. expenses.
d. liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
121. If
total liabilities increased by $8,000, then
a. assets must have decreased by $8,000.
b. stockholders' equity must have
increased by $8,000.
c. assets must have increased by $8,000, or stockholders' equity must have decreased by $8,000.
d. assets and stockholders'
equity each increased by $4,000.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
122. Collection
of a $1,000 Accounts Receivable
a. increases an asset $1,000;
decreases an asset $1,000.
b. increases an asset $1,000;
decreases a liability $1,000.
c. decreases a liability $1,000;
increases stockholders' equity $1,000.
d. decreases an asset $1,000;
decreases a liability $1,000.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
123. Revenues are
a. the cost of assets consumed during the period.
b. gross increases in stockholders'
equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
124. If an individual asset is increased, then
a. there must be an equal decrease in a specific liability.
b. there must be an equal decrease in stockholders' equity.
c. there must be an equal decrease in another asset.
d. any of these is possible.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
125. If
services are rendered for credit, then
a. assets will decrease.
b. liabilities will increase.
c. stockholders' equity will increase.
d. liabilities will decrease.
Ans:LO7 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
126. If expenses are paid in cash, then
a. assets will increase.
b. liabilities will decrease.
c. stockholders' equity will increase.
d. assets will decrease.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
127. If a corporation distributes cash to its
stockholders', then
a. there has been a violation of accounting principles.
b. stockholders' equity will increase.
c. stockholders' equity will decrease.
d. there will be a new liability showing the stockholders owes money to the business.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
128. If supplies that have been purchased are
used in the course of business, then
a. a liability will increase.
b. an asset will increase.
c. stockholders' equity will decrease.
d. stockholders' equity will increase.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
129. As of December 31, 2013, Calexico Company
has assets of $37,000 and stockholders' equity of $20,000. What are the
liabilities for CalexicoCompany as of December 31, 2013?
a. $17,000.
b. $20,000.
c. $37,000.
d. $57,000.
Ans:LO7 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
130. Which of the following events is not a business transaction?
a. Issuance of stock in exchange for cash.
b. Hired employees.
c. Incurred utility expenses for the month.
d. Earned revenue for services provided.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
131. Net income results when
a. Assets > Liabilities.
b. Revenues = Expenses.
c. Revenues > Expenses.
d. Revenues < Expenses.
Ans:LO8 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
132. Retained earnings at the end of the period
is equal to
a. retained earnings at the beginning of the period plus net income
minus liabilities.
b. retained earnings at the beginning of the period plus net income
minus dividends.
c. net income.
d. assets plus liabilities.
Ans:LO8 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
133. A
balance sheet shows
a. revenues, liabilities, and stockholders' equity.
b. expenses, dividends, and stockholders' equity.
c. revenues, expenses, and dividends.
d. assets, liabilities, and stockholders' equity.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
134. An income statement
a. summarizes the changes in retained earnings for a specific period
of time.
b. reports the changes in assets,
liabilities, and stockholders' equity over a period of time.
c. reports the assets, liabilities, and stockholders' equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
135. If
the retained earnings account increases from the beginning of the year to the
end of the year, then
a. net income is less than dividends.
b. a net loss is less than dividends.
c. the company must have sold stock.
d. net income is greater than dividends.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
136. Mofro’s
Computer Repair Shop started the year with total assets of $270,000 and total
liabilities of $180,000. During the year, the business recorded $450,000 in
computer repair revenues, $270,000 in expenses, and Mofropaid dividends of
$45,000. Stockholders' equity at the end of the year was
a. $180,000.
b. $210,000.
c. $225,000.
d. $270,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
137. Mofro’s
Computer Repair Shop started the year with total assets of $270,000 and total
liabilities of $180,000. During the year, the business recorded $450,000 in
computer repair revenues, $270,000 in expenses, and Mofropaid dividends of
$45,000. The net income reported by Mofro's Computer Repair Shop for the year
was
a. $90,000.
b. $135,000.
c. $180,000.
d. $225,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
138. Mofro’s Computer Repair Shop started the
year with total assets of $270,000 and total liabilities of $180,000. During the
year, the business recorded $450,000 in computer repair revenues, $270,000 in
expenses, and Mofropaid dividends of $45,000.Mofro'sstockholders' equity
changed by what amount from the beginning of the year to the end of the year?
a. $90,000.
b. $135,000.
c. $180,000.
d. $225,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
139. The balance sheet is frequently referred to
as
a. an operating statement.
b. the statement of financial position.
c. the statement of cash flows.
d. the statement of retained earnings.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
140. The primary purpose of the
statement of cash flows is to report
a. a company's
investing transactions.
b. a company's
financing transactions.
c. information
about cash receipts and cash payments of a company.
d. the net
increase or decrease in cash.
Ans:LO8 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
141. All
of the financial statements are for a period of time except the
a. income
statement.
b. retained
earnings statement.
c. balance sheet.
d. statement of
cash flows.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
142. The ending retained earnings amount is
shown on
a. the balance
sheet only.
b. theretained
earnings statement only.
c. both the
income statement and the retained earnings statement.
d. both the
balance sheet and the retained earnings statement.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
143. Black Keys Company began the year with stockholders'equity
of $185,000. During the year, the company recorded revenues of $250,000,
expenses of $190,000, and paid dividends of $20,000. What was Black
Keys’stockholders'equity at the end of the year?
a. $185,000.
b. $225,000.
c. $245,000.
d. $265,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
144. Kennedy Company issued stock to Ed Kennedy
in exchange for his investment of $25,000 cash in the business. The company
recorded revenues of $185,000, expenses of $140,000, and had paid dividends of
$10,000. What was Kennedy's net income for the year?
a. $35,000.
b. $45,000.
c. $55,000.
d. $60,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
145. Centro-matic Company began the year with stockholders'
equity of $15,000. During the year, Centro-maticissued additional shares of
stock in exchange for cash of $21,000, recorded expenses of $60,000, and paid
dividends of $4,000. If Centro-matic’s ending stockholders' equity was $56,000,
what was the company’s revenue for the year?
a. $80,000.
b. $84,000.
c. $101,000.
d. $105,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 2.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
146. Barsuk Company began the year with stockholders'
equity of $217,000. During the year, Barsukissued stock for $294,000, recorded
expenses of $840,000, and paid dividends of $56,000. If Barsuk’s ending stockholders'
equity was $581,000, what was the company’s revenue for the year?
a. $910,000.
b. $966,000.
c. $1,204,000.
d. $1,260,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 2.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
Use the following information for questions
147–148.
Fat Possum’s Service Shop started the year
with total assets of $110,000 and total liabilities of $80,000. During the
year, the business recorded $210,000 in revenues, $140,000 in expenses, and paid
dividends of $20,000.
147. Stockholders'
equity at the end of the year was
a. $30,000.
b. $80,000.
c. $100,000.
d. $120,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
148. The
net income reported by Fat
Possum’s
Service Shop for the year was
a. $50,000.
b. $70,000.
c. $80,000.
d. $90,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
149. Misra Company
compiled the following financial information as of December 31, 2013:
Revenues $170,000
Retained earnings
(1/1/13) 30,000
Equipment 40,000
Expenses 125,000
Cash 45,000
Dividends 10,000
Supplies 5,000
Accounts payable 20,000
Accounts
receivable 35,000
Common stock 40,000
Misra’s assets on
December 31, 2013 are
a. $90,000.
b. $125,000.
c. $180,000.
d $245,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
150. Misra Company
compiled the following financial information as of December 31, 2013:
Revenues $170,000
Retained earnings
(1/1/13) 30,000
Equipment 40,000
Expenses 125,000
Cash 45,000
Dividends 10,000
Supplies 5,000
Accounts payable 20,000
Accounts
receivable 35,000
Common stock 40,000
Misra’sstockholders' equity on December 31, 2011
is
a. $45,000.
b. $70,000.
c. $105,000.
d. $125,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
151. Teamboo Company’s stockholders'
equity at the beginning of August 2013 was
$300,000. During the month, the company
earned net income of $70,000 and paid dividends of $30,000. At the end of
August 2013, what is the amount of stockholders' equity?
a. $270,000
b. $300,000
c. $330,000
d. $340,000
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
152. On January 1, 2013, Cat
Power Company reported stockholders'
equity of $470,000. During the year, the company paid dividends of $20,000. At
December 31, 2013, the amount ofstockholders' equity was $550,000. What amount of net income or net
loss would the company report for 2013?
a. Net loss of $20,000
b. Net income of $60,000
c. Net income of $80,000
d. Net income of $100,000
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
153. Stahl Consulting
started the year with total assets of $20,000 and total liabilities of $5,000.
During the year, the business recorded $16,000 in catering revenues and $10,000
in expenses. Stahlissued stock of $3,000 and paid dividends of $5,000 during
the year.The stockholders' equity at the end of the year was
a. $11,000.
b. $18,000.
c. $19,000.
d. $21,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
154. Stahl Consulting
started the year with total assets of $20,000 and total liabilities of $5,000.
During the year, the business recorded $16,000 in catering revenues and $10,000
in expenses. Stahlissued stock of $3,000 and paid dividends of $5,000 during
the year.The net income reported by Stahl Consulting for the year
was:
a. $1,000.
b. $4,000.
c. $6,000.
d. $9,000.
Ans:LO8 BT: AP
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
155. Stahl Consulting
started the year with total assets of $20,000 and total liabilities of $5,000.
During the year, the business recorded $16,000 in catering revenues and $10,000
in expenses. Stahlissued stock of $3,000 and paid dividends of $5,000 during
the year.Stockholders' equity
changed by what amount from the beginning of the year to the end of the year?
a. $1,000.
b. $3,000.
c. $4,000.
d. $15,000.
Ans:LO8 BT: AP
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting
156. During the year 2013, Dilego Company earned
revenues of $45,000, had expenses of $28,000, purchased assets with a cost of
$5,000 and paid dividends of $3,000. Net income for the year is
a. $9,000.
b. $12,000.
c. $14,000.
d. $17,000.
Ans:LO8 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
157. At October 1, Arcade Fire Enterprises
reported stockholders' equity of $35,000. During October, no stock was issued
and the company earned net income of $9,000. If stockholders' equityat October
31 totals $39,000, what amount of dividends werepaid during the month?
a. $0
b. $4,000
c. $5,000
d. $13,000
Ans:LO8 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
158. At October 1, Arcade Fire Enterprises
reported stockholders' equity of $36,000. During October, no stock was issued
and the company posted a net loss of $4,000. If stockholders' equity at October
31 totals $32,000, what amount of dividends werepaid during the month?
a. $0
b. $2,000
c. $4,000
d. $8,000
Ans:LO8 BT: AN
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
159. At October 1, Arcade FireEnterprises
reported stockholders' equity of $35,000. During October, common stock of
$2,000 was issued and the company earned net income of $7,000. If stockholders'
equity at October 31 totals $40,000, what amount of dividends werepaid during
the month?
a. $0
b. $2,000
c. $4,000
d. $5,000
Ans:LO8 BT: AN
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
160. At October 1, Arcade FireEnterprises
reported stockholders' equity of $35,000. During October, common stock of
$5,000 was issued and the company posted a net loss of $2,000. If stockholders'
equity at October 31 totals $35,000, what amount of dividends werepaid during
the month?
a. $0
b. $2,000
c. $3,000
d. $5,000
Ans:LO8 BT: AN
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a161. All of the following are services offered by
public accountants except
a. budgeting.
b. auditing.
c. tax planning.
d. consulting.
Ans:LO9 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a162. Which list below best describes the major
services performed by public accountants?
a. Bookkeeping, mergers, budgets.
b. Employee training, auditing, bookkeeping.
c. Auditing, taxation, management consulting.
d. Cost accounting, production scheduling, recruiting.
Ans:LO9 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a163. Preparing tax returns and engaging in tax
planning is performed by
a. public accountants only.
b. private accountants only.
c. both public and private accountants.
d. IRS accountants only.
Ans:LO9 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
a164. A private accountant can perform many
activities in a business organization but would not work in
a. budgeting.
b. accounting information systems.
c. external auditing.
d. tax accounting.
Ans:LO9 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
165. Which
of the following is not part of the
accounting process?
a. Recording
b. Identifying
c. Financial decision making
d. Communicating
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
166. The first part of the accounting process is
a. communicating.
b. identifying.
c. processing.
d. recording.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
167. Keeping a systematic, chronological diary
of events that are measured in dollars and cents is called
a. communicating.
b. identifying.
c. processing.
d. recording.
Ans:LO1 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
168. Auditing is
a. the examination of financial statements by a CPA in order to
express an opinion on their fairness.
b. a part of accounting that involves only recording of economic
events.
c. an area of accounting that involves such activities as cost
accounting, budgeting, and accounting information systems.
d. conducted by the Securities and Exchange Commission to ensure that
registered financial statements are presented fairly.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
169. Internal users of accounting information
include all of the following except
a. company officers.
b. investors.
c. marketing managers.
d. production supervisors.
Ans:LO2 BT: K
Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
170. The
organization(s) primarily responsible for establishing generally accepted
accounting principles is(are) the
FASB SEC
a. no no
b. yes no
c. no yes
d. yes yes
Ans: S04 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
171. The primary accounting standard-setting
body in the United States is the
a. Financial Accounting Standards Board.
b. International Accounting Standards Board.
c. Internal Revenue Service.
d. Securities and Exchange Commission.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
172. A proprietorship is a business
a. owned by one person.
b. owned by two or more persons.
c. organized as a separate legal entity under state corporation law.
d. owned by a governmental agency.
Ans:LO5 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
173. A net loss will result during a time
period when
a. assets exceed liabilities.
b. assets exceed stockholders' equity.
c. expenses exceed revenues.
d. revenues exceed expenses.
Ans:LO6 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
174. Bright Eyes Downtown Diner received
a bill of $600 from the Jronand Wine Advertising Agency. The owner, A. A. Bondy,
is postponing payment of the bill until a later date. The effect on specific
items in the basic accounting equation is
a. a decrease in Cash and an increase in Accounts Payable.
b. a decrease in Cash and an increase in Retained Earnings.
c. an increase in Accounts Payable and a decrease in Retained
Earnings.
d. a decrease in Accounts Payable and an increase in Retained
Earnings.
Ans:LO7 BT: C
Difficulty: Medium TOT: 1.5
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
175. Matador Company purchases $1,300 of
equipment from Danger Mouse Inc. for cash. The effect on the components of the
basic accounting equation of Matador Company is
a. an increase in assets and liabilities.
b. a decrease in assets and liabilities.
c. no change in total assets.
d. an increase in assets and a decrease in liabilities.
Ans:LO7 BT: C
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
176. Druganaut Company buys a $21,000 van
on credit. The transaction will affect the
a. income statement only.
b. balance sheet only.
c. income statement and retained earnings statement only.
d. income statement, retained earnings statement, and balance sheet.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
177. The financial statement that
summarizes the financial position of a company is the
a. income statement.
b. balance sheet.
c. operating statement.
d. retained earnings statement.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
Answers to Multiple Choice Questions
|
Item
|
Ans.
|
Item
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Ans.
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Item
|
Ans.
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Item
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Item
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Ans.
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Item
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Ans.
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Item
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Ans.
|
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44.
|
c
|
64.
|
d
|
84.
|
d
|
104.
|
a
|
124.
|
c
|
144.
|
b
|
a164.
|
c
|
|
45.
|
b
|
65.
|
b
|
85.
|
b
|
105.
|
d
|
125.
|
c
|
145.
|
b
|
165.
|
c
|
|
46.
|
c
|
66.
|
a
|
86.
|
c
|
106.
|
a
|
126.
|
d
|
146.
|
b
|
166.
|
b
|
|
47.
|
a
|
67.
|
a
|
87.
|
d
|
107.
|
c
|
127.
|
c
|
147.
|
b
|
167.
|
d
|
|
48.
|
a
|
68.
|
a
|
88.
|
b
|
108.
|
d
|
128.
|
c
|
148.
|
b
|
168.
|
a
|
|
49.
|
c
|
69.
|
b
|
89.
|
c
|
109.
|
b
|
129.
|
a
|
149.
|
b
|
169.
|
b
|
|
50.
|
c
|
70.
|
b
|
90.
|
d
|
110.
|
b
|
130.
|
b
|
150.
|
c
|
170.
|
d
|
|
51.
|
b
|
71.
|
d
|
91.
|
c
|
111.
|
a
|
131.
|
c
|
151.
|
d
|
171.
|
a
|
|
52.
|
a
|
72.
|
a
|
92.
|
a
|
112.
|
c
|
132.
|
b
|
152.
|
d
|
172.
|
a
|
|
53.
|
c
|
73.
|
c
|
93.
|
d
|
113.
|
b
|
133.
|
d
|
153.
|
c
|
173.
|
c
|
|
54.
|
d
|
74.
|
c
|
94.
|
d
|
114.
|
a
|
134.
|
d
|
154.
|
c
|
174.
|
c
|
|
55.
|
b
|
75.
|
b
|
95.
|
d
|
115.
|
a
|
135.
|
d
|
155.
|
c
|
175.
|
c
|
|
56.
|
c
|
76.
|
b
|
96.
|
b
|
116.
|
c
|
136.
|
c
|
156.
|
d
|
176.
|
b
|
|
57.
|
a
|
77.
|
a
|
97.
|
d
|
117.
|
d
|
137.
|
c
|
157.
|
c
|
177.
|
b
|
|
58.
|
d
|
78.
|
d
|
98.
|
c
|
118.
|
b
|
138.
|
b
|
158.
|
a
|
|
|
|
59.
|
c
|
79.
|
b
|
99.
|
b
|
119.
|
b
|
139.
|
b
|
159.
|
c
|
|
|
|
60.
|
c
|
80.
|
d
|
100.
|
a
|
120.
|
c
|
140.
|
c
|
160.
|
c
|
|
|
|
61.
|
c
|
81.
|
c
|
101.
|
c
|
121.
|
c
|
141.
|
c
|
a161.
|
a
|
|
|
|
62.
|
c
|
82.
|
b
|
102.
|
a
|
122.
|
a
|
142.
|
d
|
a162.
|
c
|
|
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|
63.
|
c
|
83.
|
c
|
103.
|
b
|
123.
|
b
|
143.
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b
|
a163.
|
c
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|
|
Answers to Completion Statements
229. records,
communicates 234. cost
230. bookkeeping,
accounting 235. economic entity
231. auditing,
taxation, consulting 236. stockholders' equity
232. private
(or managerial) 237. reduce
233. generally
accepted accounting principles 238. balance sheet
LO1-8 BT: K Difficulty: Easy TOT: 5 min.
AACSB: Reflective Thinking AICPA
BB: Critical Thinking AICPA FN: Reporting
IFRS QUESTIONS
246. Which of the following is not a
reason one set of international accounting standards are needed?
a. multinational corporations.
b. mergers and acquisitions.
c. information technology.
d. all of the above are reasons one set of international
accounting standards are needed.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
247. Which of the following is not a
reason one set of international accounting standards are needed?
a. multinational corporations.
b. financial markets.
c. information technology.
d. all of the above are reasons one set of international
accounting standards are needed.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
248. International standards are referred
to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
249. U.S. standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
250. International standards are developed
by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
251. U.S. standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
252. The United States and the
international standard-setting environment are primarily driven by meeting the needs
of
a. investors and creditors.
b. tax authorities.
c. central government planners.
d. academic researchers.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
253. The internal control standards
applicable to Sarbanes-Oxley apply to
a. all U.S. and international companies.
b. U.S. and international companies listed on U.S. exchanges.
c. International companies listed on U.S. exchanges.
d. U.S. companies listed on U.S. exchanges.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
254. The concern about international
companies adopting SOX-type standards centers on
a. cost-benefit analysis.
b. ethics issues.
c. the governing authorities.
d. comparability.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
255. Financial accounting ethics
violations are
a. not a problem in the U.S. or internationally.
b. much more common in the U.S. than internationally.
c. much more common internationally than in the U.S.
d. a major problem both in the U.S. and internationally.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
256. IFRS, compared to GAAP, tends to be
more
a. detailed.
b. rules-based.
c. principles-based.
d. full of disclosure requirements.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
257. GAAP, compared to IFRS, tends to be
more
a. simple in accounting requirements.
b. rules-based.
c. principles-based.
d. simple in disclosure requirements.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
258. Proprietorships, partnerships, and
corporations
a. are the three most common forms of business organizations in the
U.S.
b. are the three most common forms of business organizations
internationally.
c. are used in different proportions in different countries.
d. all of the above are true.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
259. The conceptual framework that
underlies IFRS
a. is very similar to that used to develop GAAP.
b. does not define assets or liabilities.
c. does not define equity.
d. does not define income or expenses.
Ans:LO8 BT: K
Difficulty: Easy TOT: 1.0
min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA
FN: Reporting
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