84 free test bank for financial accounting 1st

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84 Free Test Bank for Financial Accounting 1st

Edition by Waybright Multiple Choice Questions-Page 1

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

4. D Cost

GAAP is the acronym for generally accepted _ principles

1. A auditing

2. B accounting

3. C averaging

4. D associated

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

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

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

A tax service is primarily a:

1. A merchandising operation

2. B service operation

3. C not-for-profit operation

4. D manufacturing operation

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

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

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

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

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

Cash and Accounts receivable are both a part of:

1. A assets

2. B retained earnings.

3. C liabilities

4. D common stock

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

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

4. D Cost

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 guidelines that describe the rules of accounting are called:

1. A GAAS

3. C FASB

4. D SEC

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

By definition, which type of organization has stockholders?

1. A Partnerships

2. B Sole proprietorships

3. C Corporations

4. D Limited liability companies

FASB is made up of _ members

1. A 3

2. B 5

3. C 7

4. D 9

The issues pronouncements that are guidelines for accounting practice.

1. A GAAP

2. B SEC

4. D IRS

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

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

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

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

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

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

1. A $188,000

2. B $123,000

3. C $ 65,000

4. D $ 58,000

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

Revenues, expenses and dividends are all a part of:

1. A assets

2. B retained earnings

3. C liabilities

4. D common stock

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 written promise to pay?

1. A Accounts receivable

2. B Accounts payable

3. C Notes payable

4. D Dividends payable

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

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

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

The accounting principle that best defines a business is:

1. A entity

2. B cost

3. C reliability

4. D going concern

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

Which of the following is considered an asset?

1. A Accounts payable

2. B Sales

3. C Accounts receivable

4. D Common stock

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

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

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 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

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

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

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

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 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

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

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

84 Free Test Bank for Financial Accounting 1st Edition

by Waybright Multiple Choice Questions-Page 2

Dividends are part of:

1. A sales

2. B expenses

3. C retained earnings

4. D assets

The income statement 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’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?

1. A $474,500

2. B $345,000

3. C $215,500

4. D Some other number

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

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

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 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

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

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

A statement of cash flows is usually prepared:

1. A first

2. B second

3. C third

4. D last

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

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

Beginning retained earnings are $65,000; sales are $29,500;

expenses were $33,000 and dividends paid are $3,500 How much

is the net income or loss for the company?

1. A $26,000

2. B ($3,500)

3. C ($7,000)

4. D $0

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

1. A assets

2. B retained earnings

3. C liabilities

4. D dividends

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

Items such as revenue, expenses and dividends are classified as:

1. A stockholders’ equity

2. B retained earnings

3. C liabilities

4. D assets

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

2. B $ 500

3. C $34,300

4. D ($3,300)

Monies owed to a company by customers are classified as:

1. A payables

2. B dividends

3. C cash

4. D receivables

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

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

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

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

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

Payables are classified as:

1. A stockholders’ equity

2. B retained earnings.

3. C liabilities

4. D assets

Which of the following financial statements illustrates the

accounting equation?

1. A Statement of retained earnings

2. B Income statement

3. C Balance sheet

4. D Statement of cash flows

Which of the following is a TRUE statement?

1. A Purchasing office equipment for cash is a shift of assets

2. B Buying something on account decreases total liabilities

3. C Retained earnings do not include payments of dividends

4. D Paying off an account increases the total of assets

Payables are categorized as:

1. A liabilities

2. B assets

3. C retained earnings

4. D common stock

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

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

1. A Statement of retained earnings

2. B Income statement

3. C Balance sheets

4. D Statement of cash flows

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

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

1. A increase liabilities, increase assets