Accounts receivable decreases; Retained earnings account decreases.. Cash account increases; Accounts receivable decreases.. Accounts payable increases; Retained earnings account decreas
Trang 1110 Free Test Bank for Financial and Managerial
Accounting 3rd Edition
by Horngren
Multiple Choice Questions
Which of the following are MOST likely to be users of managerial accounting information?
1 A Potential investors
2 B Creditors
4 D Company managers.
A corporation possesses all but one of the following
characteristics Which of the following is NOT a characteristic of acorporation?
1 A If a corporation cannot pay its debts, lenders can take the owners' personal assets to satisfy the obligations.
2 B A corporation is a distinct entity in the eyes of the law.
3 C Corporation ownership is divided into shares of stock.
4 D A corporation is owned by shareholders or stockholders.
Which of the following is a licensed accountant who serves the general public rather than an accountant who serves one
Trang 21 A steal shareholders' money.
2 B default on loans from creditors.
3 C declare bankruptcy.
4 D falsify financial information.
Which of the following is NOT a characteristic of a traditional partnership?
1 A A partnership is owned by shareholders or stockholders.
2 B If a partnership cannot pay its debts, lenders can take the owners' personal assets to satisfy the obligations.
3 C A partnership joins two or more individuals as co-owners.
4 D Each partner has the authority to commit the entire partnership to a binding contract.
The Ragun Cajun Bar and Grill, Inc has been a popular
restaurant in Beaumont, Texas With no insurance, a recent hurricane has left the business with large losses due to a damaged building and lost business income Which of the following concepts or principles of accounting will be of the greatest concern to Ragun Cajun's auditors?
1 A Going-concern concept
2 B Faithful representation principle
3 C Entity concept
4 D Stable monetary unit concept
Which of the following is a characteristic of a limited liability partnership (LLP.?
1 A A limited liability partnership issues shares of stock to shareholders.
2 B Each partner is liable only for the actions under his or her control.
3 C A limited liability partnership is owned by a single investor.
Trang 34 D The limited liability partners are subject to "double taxation."
Which of the following are likely to be users of financial
accounting information?
1 A Taxing authorities
2 B Creditors
3 C Potential investors
4 D All of the above
Lindsey Smith decided to start her own CPA practice as a
professional corporation, Smith CPA PC Her corporation
purchased an office building for $35,000 which her real estate agent said was worth $50,000 in the current market The
corporation records the building as a $50,000 asset because Lindsey believes that is the real value of the building Which of the following concepts or principles of accounting is being
Trang 41 A Partnership
2 B Limited liability company
3 C Proprietorship
4 D Not-for-profit
The separation between the owners and the managers of a
business is most distinct in a(n.:
3 C Financial statements are documents that report on a business in
monetary terms, providing information to help people make informed
Trang 51 A Globally accepted and accurate policies
2 B Global accommodation accounting principles
3 C Generally accredited accounting policies
4 D Generally accepted accounting principles
Stockholders' equity is $150,000 and total liabilities are $90,000 Total assets would be:
1 A Faithful representation principle
Trang 61 A liabilities.
2 B equity.
3 C assets.
4 D revenues.
Dylan Chase is a partner in a CPA practice One of Dylan's
partners sometimes takes a very aggressive position when
auditing clients Which of the following business types would protect Dylan's personal assets from malpractice liability for his partner's aggressive auditing tactics?
1 A Limited liability partnership
Which of the following is TRUE for a proprietorship?
1 A A proprietorship joins two or more individuals as co-owners.
2 B The proprietor is not personally liable for the debts of the proprietorship.
3 C A proprietorship has a single owner.
4 D A proprietorship has an indefinite life.
Trang 7A promise received from a company's customers to pay for goodsand services that they received from the company is called a(n.:
Tate Corporation purchased a building for its grocery store for
$30,000 in 1970 Based on inflation estimates, the amount of this asset has been adjusted in the accounting records The building
is now reported at $75,000 Which of the following concepts or principles of accounting is being violated?
1 A Going-concern concept
2 B Stable monetary unit concept
3 C Entity concept
4 D None of the above
The largest businesses are usually organized as:
1 A corporations.
2 B partnerships.
3 C proprietorships.
Trang 8A debt that a corporation owes to an outside party is called:
1 A assets of the shareholders.
2 B assets of the company only.
3 C assets of the board of directors.
4 D employees of the company.
Trang 9Which of the following concepts (principles require an
assumption that the entity will remain in operation for the
be best suited to help the company raise the necessary capital to begin production?
1 A Corporation
2 B Proprietorship
3 C Partnership
4 D Limited liability partnership
Corporate ownership is a very popular type of ownership in the United States because:
1 A corporate shareholders have limited liability for the debts of the
corporation.
2 B most corporations are small or medium-sized companies.
3 C the life of a corporation is limited by the death of an owner.
4 D a corporation is usually managed by the owners.
In an LLC, who is responsible for the company's debts?
1 A The company itself
2 B The partners
Trang 103 C The individual investors
4 D The proprietor
The first step in incorporation is to:
1 A have the board of directors designate a president.
2 B agree to a set of bylaws.
3 C issue the first shares of stock.
4 D obtain a charter from the state.
The ability to raise large amounts of capital is a key characteristic
2 B Managerial accounting focuses on outside investors and lenders.
3 C Managerial accounting provides information for the public.
4 D Managerial accounting provides information for taxing authorities.
Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs.?
1 A SEC
Trang 114 D AICPA
The primary objective of financial reporting is to provide
information useful for making investment and lending decisions Which of the following is NOT one of the basic characteristics thatfinancial information must possess to be useful?
1 A Reliability
2 B Creativity
4 D Comparability
The owner(s of a business will most likely face "double taxation"
if their business is organized as a(n.:
Which of the following is the CORRECT accounting equation?
1 A Assets + Liabilities = Stockholders' equity
Trang 122 B Assets = Liabilities + Stockholders' equity
3 C Assets + Revenue = Stockholders' equity
4 D Assets + Revenue = Liabilities + Expenses
A financial examination of a company's financial records is called a(n.:
1 A audit.
2 B criminal investigation.
3 C financial analysis.
4 D appraisal.
Which of the following organizations or groups issue an opinion
on whether a company's financial statements are a fair
representation of the company's financial situation?
2 B Board of Directors
3 C Shareholders
4 D Independent Accountants (CPAs.
110 Free Test Bank for Financial and Managerial
Accounting 3rd Edition by Horngren Multiple Choice Questions-Page 2
The assets and liabilities of Matt Wesley Corporation are as
follows: Cash, $10,000; Accounts receivable, $8,200; Supplies,
$1,050; Land, $25,000; Accounts payable, $6,530 What is the amount of stockholders' equity?
1 A $21,500
2 B $44,430
3 C $50,780
Trang 134 D $37,720
Net income is $29,000 Beginning retained earnings were
$34,000 Ending retained earnings are $55,000 What amount of cash dividends was paid out?
1 A $18,000
2 B $8,000
4 D $60,000
Assets are $150,000 and total liabilities are $90,000 Total
stockholders' equity will be:
1 A $180,000.
2 B $300,000.
3 C $240,000.
4 D $60,000.
Scott's Camera Shop, Inc started the year with total assets
$80,000 and total liabilities of $40,000 During the year, the
business earned revenues of $120,000 and incurred expenses of
$70,000 Scott paid dividends of $60,000 The net change in Scott's stockholders' equity for the year is a:
Trang 143 C owners' equity.
4 D expenses.
Martin Supply Co received $1,000 cash from a customer which was owed to the company from the previous month Which of the following accounts decreases?
1 A Accounts receivable decreases; Retained earnings account decreases.
2 B Cash account increases; Accounts receivable decreases.
3 C Accounts payable increases; Retained earnings account decreases.
4 D Cash increases; Accounts payable decreases.
An individual asset has increased Which of the following is
possible?
1 A There is an equal decrease in another asset.
2 B There is an equal decrease in stockholders' equity.
3 C There is an equal decrease in a liability account.
4 D Both liabilities and stockholders' equity decrease.
Hamilton Service Co incurred an $800 repair expense and paid the repair company in cash Which account, besides Cash,
decreased?
1 A Retained earnings
Trang 152 B Accounts payable
4 D Accounts receivable
Hamilton Service Co incurred a $500 labor expense and
promised to pay the labor agency within 30 days Which account increased?
1 A Accounts receivable
3 C Accounts payable
4 D Retained earnings
The business collects a $5,000 account receivable from its
customer How is the accounting equation affected?
1 A Assets increase $5,000; liabilities decrease $5,000.
2 B One asset increases by $5,000; another asset decreases $5,000.
3 C Assets increase $5,000; liabilities increase $5,000.
4 D Assets increase $5,000; stockholders' equity increases $5,000.
Land is purchased by the company for $100,000 The company pays for land with a $20,000 cash payment and the execution of
an $80,000 promissory note payable to the seller How does this purchase affect the company's accounting equation?
1 A Assets increase $80,000; liabilities decrease $20,000.
2 B Assets increase $20,000; liabilities decrease $80,000.
3 C Assets increase $80,000; stockholders' equity increases $80,000.
4 D Assets increase $80,000; liabilities increase $80,000.
A $5,000 account payable is paid by the company How is the accounting equation affected?
Trang 161 A Assets decrease $5,000; stockholders' equity increases $5,000.
2 B Assets decrease $5,000; liabilities decrease $5,000.
3 C Assets increase $5,000; stockholders' equity decreases $5,000.
4 D Assets increase $5,000; liabilities increase $5,000.
Land was originally purchased for $20,000 It is sold for $20,000
in cash How does the sale affect the accounting equation?
1 A Assets increase $20,000; liabilities decrease $20,000.
2 B Assets increase $20,000; liabilities increase $20,000.
3 C Assets increase $20,000; stockholders' equity increases $20,000.
4 D Assets increase $20,000; assets decrease $20,000.
A business receives a bill for services rendered from one of its suppliers The business will pay the supplier next month When the business receives the bill from its supplier, how does this affect the accounting equation?
1 A Assets decrease; stockholders' equity decreases.
2 B Liabilities increase; stockholders' equity decreases.
3 C Assets increase; liabilities increase.
4 D Liabilities increase; stockholders' equity increases.
Total liabilities increase by $7,000 How is the accounting
equation affected?
1 A Either assets have increased by $7,000, or stockholders' equity has decreased by $7,000.
2 B Assets have decreased by $7,000.
3 C Assets and stockholders' equity have each decreased by $3,500.
4 D Stockholders' equity has increased by $7,000.
Trang 17Hamilton Service Company earned $1,000 for services rendered and collected cash from its customer What is the effect on
accounts?
1 A Cash account increases; Accounts payable increases.
2 B Cash account increases; Accounts receivable increases.
3 C Cash account increases; Supplies account decreases.
4 D Cash account increases; Retained earnings account increases.
Assets are $270,000 and stockholders' equity is $90,000
Liabilities will be:
1 A $60,000.
2 B $360,000.
3 C $270,000.
4 D $180,000.
Hamilton Service Co incurred a $500 labor expense and
promised to pay the labor agency within 30 days Which of the following accounts decreased?
1 A Materials account increases; Retained earnings account decreases.
2 B Cash account decreases; Accounts payable increases.
3 C Accounts payable increases; Retained earnings account decreases.
Trang 184 D Cash account decreases; Accounts payable decreases.
Equipment is sold for cash in an amount equal to the cost of the equipment recorded on the books How does this sale affect the accounting equation?
1 A One asset increases; one asset decreases.
2 B Assets increase; liabilities increase.
3 C Assets increase; liabilities decrease.
4 D Assets increase; stockholders' equity increases.
Bill purchased office supplies for $500 cash What is the effect on accounts?
1 A Cash account increases; Accounts payable increases.
2 B Cash account increases; Supplies account increases.
3 C Supplies account increases; Cash account decreases.
4 D Supplies account increases; Retained earnings account increases.Joe purchased office equipment for $1,250 cash What is the effect on accounts?
1 A One asset account increases; one liability account increases.
2 B Two asset accounts increase.
3 C One asset account increases; another asset account decreases.
4 D One asset account increases; one equity account increases.
Scott's Camera Shop, Inc started the year with total assets
$80,000 and total liabilities of $40,000 During the year, the
business earned revenues of $120,000 and incurred expenses of
$70,000 Scott paid dividends of $60,000 What is the amount of Scott's Camera Shop Inc.'s net income for the year?
1 A $50,000
Trang 191 A Assets increase; stockholders' equity increases.
2 B Assets increase; liabilities increase.
3 C One asset increases; one asset decreases.
4 D Assets decrease; stockholders' equity decreases.
Hamilton Service Company earned $1,000 for services rendered The customer promised to pay at a later time What is the effect
on accounts?
1 A Accounts receivable decreases; Retained earnings increases.
2 B Cash and Accounts receivable both increase.
3 C Cash account increases; Accounts receivable decreases.
4 D Accounts receivable increases; Retained earnings increases.
Scott's Camera Shop, Inc started the year with total assets of
$80,000 and total liabilities of $40,000 During the year, the
business earned revenues of $120,000 and incurred expenses of
$70,000 Scott paid dividends of $60,000 What is the amount of Scott's stockholders' equity at the end of the year?
1 A $40,000
2 B $50,000
3 C $30,000
4 D $10,000