84 test bank for financial accounting 1st edition

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84 Test Bank for Financial Accounting 1st Edition Multiple Choice Questions

Revenues, expenses and dividends are all a part of:

1. A assets

2. B retained earnings

3. C liabilities

To ensure that the guidelines for right behavior are followed, a corporation should follow:

1. A ethical principles

2. B accounting law

3. C the corporate culture

4. D the leaders in their category of business

The main goal of understanding the process of accounting is to help ensure that the business is:

1. A profitable

2. B ethical

3. C competitive

4. D admired by the customer

Which of the following is a written promise to pay?

1. A Accounts receivable

2. B Accounts payable

3. C Notes payable

4. D Dividends payable

Financial statements are prepared based on which of the

following?

1. A Generally accepted accounting principles

2. B State and local laws

3. C Internal revenue service rules

4. D Generally accepted auditing standards

Which type of business organization is owned by its

stockholders?

1. A Corporation

2. B Partnership

3. C Limited liability company

4. D Sole proprietorship

If total assets remain the same and total stockholders’ equity

increases, liabilities will:

1. A increase by the same amount

2. B decrease by the same amount

3. C remain the same

4. D increase by a different amount

A business purchases a computer for cash What effect does this have on the accounting equation?

1. A Stockholders’ equity and assets go up

2. B There is no change in total assets

3. C Assets go up and liabilities go down

4. D Stockholders’ equity and liabilities go up

FASB is made up of _ members

1. A 3

2. B 5

3. C 7

4. D 9

Which of the following business forms is similar to a corporation in regard to owner liability?

1. A Limited liability corporation

2. B Limited liability company

3. C Sole proprietorship

4. D Partnership

Ethical dilemmas may be created by all of the following EXCEPT:

1. A individual actions contradicting the goals of the business

2. B the culture of the organization clashing with ethical principles

3. C personal beliefs being different than organizational beliefs

4. D all of the employees having the same belief systems

Liabilities represent:

1. A items owned by the company

2. B future economic benefits of the company

3. C earnings kept in the business

4. D monies owed to third parties

Ethical behavior is encouraged because:

1. A our society expects ethical behavior

2. B ethics and legality are the same things

3. C laws are the same as ethics

4. D it makes the world a better place

When a person combines separate business accounts, what

concept or principle of accounting is being violated?

1. A Going concern

2. B Objectivity

3. C Entity

Which of the following types of organization would probably sell goods?

1. A Merchandising operation

2. B Service operation

3. C Not-for-profit operation

4. D Manufacturing operation

A company has $123,000 in assets and $65,000 in liabilities How much does the company have in stockholders’ equity?

3. C $ 65,000

4. D $ 58,000

Which accounting concept or principle specifically states that we should record transactions that can be verified?

1. A Going-concern concept

2. B Cost principle

3. C Reliability principle

4. D Entity concept

Which of the following is NOT a reason to study accounting?

1. A A student will become aware of ethics in business

2. B A student will learn the language of business

3. C A student will better their math skills

4. D A student will learn to analyze financial information

Accountants who ignore the effect of inflation on prices may be violating which accounting principle?

1. A Going concern

2. B Entity

3. C Reliability

4. D Something other than what is listed

By definition, which type of organization has stockholders?

1. A Partnerships

2. B Sole proprietorships

3. C Corporations

4. D Limited liability companies

Rick is negotiating with friends who may buy some camping

equipment in the near future He records this information as

possible sales What principle is Rick violating?

1. A Going concern

2. B Cost

3. C Reliability

4. D Entity

To take an inventory of goods to be sold would be representative

of what accounting concept or principle?

1. A Going concern

2. B Objectivity

3. C Entity

Miranda opens her business by investing $12,000 How does this affect the accounting equation?

1. A Increase in assets; increase in stockholders’ equity

2. B Increase in liabilities; increase in stockholders’ equity

3. C Decrease in assets; increase in stockholders’ equity

4. D Increase in assets; decrease in stockholders’ equity

Which type of company is best described as having ownership by stock and double taxation of earnings?

1. A Limited liability company

2. B Proprietorship

3. C Corporation

4. D Partnership

Rick owns a sporting goods store In his initial accounting

records, he included his personal computer and all of his personal sporting gear Rick is violating what principle of accounting?

1. A Going concern

2. B Cost

3. C Reliability

4. D Entity

The accounting principle that best defines a business is:

1. A entity

2. B cost

3. C reliability

4. D going concern.

One of the newer forms of business discussed in the text is a:

1. A corporation

2. B sole proprietorship

3. C partnership

4. D limited liability company

Which of the following is considered an asset?

1. A Accounts payable

3. C Accounts receivable

GAAP is the acronym for generally accepted _ principles

1. A auditing

2. B accounting

3. C averaging

4. D associated

A business pays off a note payable What effect does this have on the accounting equation?

1. A Assets go up, liabilities go down, and stockholders’ equity remains the same

2. B Assets go down, liabilities remain the same, and stockholders’ equity goes up

3. C Assets go down, liabilities go down, and stockholders’ equity remains the same

4. D Assets go up, liabilities remain the same, and stockholders’ equity goes up

The issues pronouncements that are guidelines for accounting practice.

3. C FASB

Which of the following do NOT pay taxes through their individual owners?

1. A S-corporation

2. B Sole proprietorship

3. C Partnership

4. D Corporation

Which of the following is a disadvantage of the corporate form of business?

1. A Ease of raising capital

2. B Double taxation

3. C Limited resources

4. D Limited liability

The guidelines that describe the rules of accounting are called:

2. B GAAP

Revenues would have which of the following effects on the

accounting equation?

1. A Decrease stockholders’ equity

2. B Increase common stock

3. C Increase liabilities

4. D Increase stockholders’ equity

Cash and Accounts receivable are both a part of:

1. A assets

2. B retained earnings

3. C liabilities

A company has liabilities of $23,500 and stockholders’ equity of

$56,500 How much does the company have in assets?

1. A $56,500

2. B $33,000

3. C $80,000

4. D $23,500

Home Depot would primarily be considered a:

1. A manufacturing business

2. B merchandising business

3. C service business

4. D not-for-profit business

Which of the following concepts would NOT be considered if you were to compare the price of a Camaro in 1979 to the price of a Camaro in 2009?

1. A Reliability of the price in 1979

2. B Objectivity of the price in 1979

3. C Market price in 1979

4. D Current cost in 2009

What is the purpose of financial accounting information?

1. A To provide biased information to the markets for trading

2. B To help investors, creditors, and others to make decisions

3. C To help managers plan and to control business operations

4. D To comply with SEC and IRS rules

Which of the following may create an ethical dilemma?

1. A A company takes an order in November for delivery in December

2. B A person sees another employee stealing and reports it

3. C A company underestimates its expenses

4. D All employee evaluations follow identical procedures

A tax service is primarily a:

1. A merchandising operation

2. B service operation

3. C not-for-profit operation

4. D manufacturing operation

Which statement is FALSE about ethics?

1. A Ethics are rules

2. B Ethics are guidelines of how we perceive right and wrong

3. C Ethics are a vital part of the accounting profession

4. D Things may be unethical but still be legal

Words such as sales, expenses, financial statements, etc are all part of the:

1. A rule of ethics

2. B rules of accounting

3. C language of business

4. D language of profitability

Which of the following types of organizations would produce goods?

1. A Merchandising operation

2. B Service operation

3. C Not-for-profit operation

4. D Manufacturing operation

Most assets should be listed at:

1. A current replacement cost

2. B current market value

3. C historical cost

4. D inflation-adjusted cost.

Rick lists his building at current replacement value, rather than the price he paid for the building What principle is Rick violating?

1. A Going concern

2. B Cost

3. C Reliability

4. D Entity

Brandon borrowed money for his business from a local bank What accounts will be affected?

1. A Cash and accounts payable

2. B Cash and notes payable

3. C Accounts payable and revenue

4. D Accounts receivable and revenue

84 Free Test Bank for Financial Accounting 1st Edition

by Waybright Multiple Choice Questions-Page 2

Which of the following is a FALSE statement?

1. A Revenues provide inward flows of assets

2. B Revenue is categorized as an asset

3. C Revenue is categorized as part of retained earnings

4. D Revenues are generated from the sale of goods and services

The payment of cash dividends would have which of the following effects on the accounting equation?

1. A Increase liabilities

2. B Decrease stockholders’ equity

3. C Increase assets

4. D Increase stockholders’ equity

Lauren purchased a computer on account for her business How will this transaction affect the accounting equation?

1. A Assets increase; liabilities decrease

2. B Assets increase; stockholder equity increases

3. C Assets increase; liabilities increase

4. D Assets decrease; liabilities increase

Beginning retained earnings are $31,000; sales are $46,800; expenses are $43,500 and dividends paid are $2,800 How much

is the amount in ending retained earnings?

1. A $34,400

2. B $28,200

3. C $34,300

4. D $31,500

Casey’s is famous for their submarine sandwiches At the end of

2009, Casey’s total assets were $345,000, and total liabilities were $129,500 How much was Casey’s stockholders’ equity?

3. C $215,500

A company purchases merchandise (inventory) for cash What is the net result on the accounting equation?

1. A Total assets will go up and total liabilities will go down

2. B Total assets will go up and stockholders’ equity will go up

3. C Total assets will not change

4. D Total liabilities will go up

The correct order for the preparation of financial statements is: 1 Statement of cash flows 2 Income statement 3 Balance sheet 4 Statement of retained earnings

1. A 4, 3, 2, 1

2. B 1, 2, 3, 4

3. C 2, 3, 4, 1

4. D 2, 4, 3, 1

Beginning retained earnings are $65,000; sales are $29,500; expenses are $33,000 and dividends paid are $3,500 How much

is the amount in ending retained earnings?

1. A $58,000

2. B $61,500

3. C $68,500

4. D $65,000

Dividends are shown on the:

1. A income statement

2. B statement of retained earnings

3. C balance sheet

4. D statement of cash flows

ABC Company sold $34,000 worth of merchandise for cash

Which of the following best describes the effect on the expanded accounting equation?

1. A Total assets and total liabilities will increase

2. B Total assets and total revenue will increase.

3. C Total liabilities will increase and total revenue will decrease

4. D Total assets will decrease and total liabilities will increase

The net income figure is needed to prepare:

1. A a balance sheet

2. B a statement of retained earnings

3. C a statement of liabilities

4. D some other report

Beginning retained earnings are $31,000; sales are $46,800; expenses are $43,500 and dividends paid are $2,800 How much

is the net income or loss for the company?

1. A $3,300

3. C $34,300

4. D ($3,300)

A net income or loss is originally shown on the:

1. A statement of cash flows

2. B balance sheet

3. C statement of retained earnings

4. D income statement

Payables are classified as:

1. A stockholders’ equity

2. B retained earnings

3. C liabilities

4. D assets

Liabilities are defined as:

1. A earnings retained in the business

2. B amounts owed to third parties

3. C stockholders’ claims to assets

4. D future economic benefits of a company

The balance sheet is used to report:

1. A results of operations for a specific date

2. B the financial position on a specific date

3. C results of operations for a specific period

4. D the financial position for a specific period

Casey invested $5,000 into his business He would:

1. A increase cash and increase stockholders’ equity

2. B decrease cash and increase stockholders’ equity

3. C increase liabilities and increase stockholders’ equity.

4. D increase cash only

The first financial statement that is prepared is the:

1. A Statement of Cash Flows

2. B Income Statement

3. C Statement of Retained Earnings

4. D Balance Sheet

Payables are categorized as:

1. A liabilities

2. B assets

3. C retained earnings

Payment of expenses would have which of the following effects

on the accounting equation?

1. A Increase liabilities

2. B Decrease stockholders’ equity

3. C Increase assets

4. D Increase stockholders’ equity

Of the financial statements, which is dated as of a specific date?

1. A Statement of cash flows

2. B Income statement

3. C Balance sheet

4. D Statement of retained earnings

Assets are defined as:

1. A earnings retained in the business

2. B amounts owed to others

3. C stockholders’ claims to assets

4. D future economic benefits of a company

Dividends are part of:

1. A sales

2. B expenses

3. C retained earnings

4. D assets

In the expanded accounting equation, revenues minus expenses are part of:

1. A assets

2. B retained earnings

3. C liabilities

4. D dividends.

Which of the financial statements includes a listing of assets owned by the company?

1. A Statement of cash flows

2. B Income statement

3. C Balance sheet

4. D Statement of retained earnings

ABC purchased office supplies on account for $50,000 How would this transaction affect ABC’s accounting equation?

1. A Increase assets and stockholders’ equity by $50,000

2. B Increase liabilities and stockholders’ equity by $50,000

3. C Increase assets by $50,000 and decrease liabilities by $50,000

4. D Increase assets by $50,000 and increase liabilities by $50,000

Celia buys a new machine for her shop on credit The effect on the accounting equation is:

1. A increase liabilities, increase assets

2. B decrease liabilities, increase assets

3. C increase assets, increase stockholders’ equity

4. D increase liabilities, decrease stockholders’ equity

Monies owed to a company by customers are classified as:

1. A payables

2. B dividends

4. D receivables

Having a net loss will:

1. A decrease retained earnings

2. B increase retained earnings

3. C force the company into bankruptcy

4. D force the company to pay dividends

A statement of cash flows is usually prepared:

1. A first

2. B second

3. C third

4. D last

Beginning retained earnings for the period would be shown on the:

1. A Statement of retained earnings

2. B Income statement