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Trang 1134 Test Bank for Financial Accounting Tools for
Business Decision Making 7th Edition by Kimmel
Multiple Choice Questions
Which of the following is the best definition of an internal user of accounting information?
1 a.Investors who use accounting information to decide whether to buy or sell stock.
2 b.Creditors like banks that use accounting information to evaluate the risk of lending money.
3 c.Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefits.
4 d.Managers who use accounting information to plan, organize, and run a business.
Which of the following would not be considered an internal user of accounting data for a company?
1 a.The president of a company
2 b.The controller of a company
3 c.Creditor of a company
4 d.Salesperson of a company
Which one of the following questions is most likely asked by an internal human resources director for the company?
1 a.Which product line is most profitable?
2 b.What price for our product will maximize the company income?
3 c.What average pay raise is affordable for employees this year?
4 d.Should any product lines be eliminated?
Which of the following is not one of the three forms of business organization?
1 a.Financial comparison of operating alternatives
2 b.Marketing strategies for a product that will be introduced in eighteen months
3 c.Forecasts of cash needs for the upcoming year
4 d.Amount of net income retained in the business
Trang 2A corporation has which of the following set of characteristics?
1 a.Shared control, tax advantages, increased skills and resources
2 b.Simple to set up and maintains control with founder
3 c.Easier to transfer ownership and raise funds, no personal liability
4 d.Harder to raise funds and gives owner control
Which of the following statements is not true regarding the
Sarbanes-Oxley Act (SOX)?
1 a.The Act calls for increased oversight responsibilities for boards of directors.
2 b.The Act has resulted in increased penalties for financial fraud by top
The partnership form of business organization
1 a.is a separate legal entity.
2 b.is a common form of organization for service-type businesses.
3 c.enjoys an unlimited life.
4 d.has limited liability.
The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)
Trang 31 a.President of the company
2 b.Production manager
3 c.Merchandise inventory clerk
4 d.President of the employees' labor union
External users want answers to all of the following questions
except
1 a.Is the company earning satisfactory income?
2 b.Will the company be able to pay its debts as they come due?
3 c.Will the company be able to afford employee pay raises this year?
4 d.How does the company compare in profitability with competitors?
A business organized as a corporation
1 a.is not a separate legal entity in most states.
2 b.requires that stockholders be personally liable for the debts of the business.
3 c.is owned by its stockholders.
4 d.has tax advantages over a proprietorship or partnership.
A local retail shop has been operating as a sole proprietorship The business is growing and now the owner wants to incorporate Which
of the following is not a reason for this owner to incorporate?
1 a.Ability to raise capital for expansion
2 b.Desire to limit the owner’s personal liability
3 c.The prestige of operating as a corporation
4 d.The ease in transferring shares of the corporation’s stock
An advantage of the corporate form of business is that
1 a.it has limited life.
2 b.its owner’s personal resources are at stake.
3 c.its ownership is easily transferable via the sale of shares of stock.
4 d.it is simple to establish.
Which of the following is the most appropriate and modern definition
of accounting?
1 a.The information system that identifies, records, and communicates the
economic events of an organization to interested users.
2 b.A means of collecting information.
3 c.The interconnected network of subsystems necessary to operate a
Trang 42 b.labor unions.
3 c.customers.
4 d.regulatory agencies.
Which of the following groups uses accounting information primarily
to insure the entity is operating within prescribed rules?
2 b.Forecast of cash needs for the upcoming year
3 c.Cash provided by investing activities
4 d.Beginning cash balance
Which of the following groups uses accounting information to
determine whether the company’s net income will result in a stock price increase?
1 a.Investors in common stock
2 b.Marketing managers
3 c.Creditors
4 d.Chief Financial Officer
Which of the following is a primary user of accounting information with a direct financial interest in the business?
1 a.Taxing authority
2 b.Creditor
3 c.Regulatory agency
4 d.Labor union
The proprietorship form of business organization
1 a.must have at least two owners in most states.
2 b.generally receives favorable tax treatment relative to a corporation.
3 c.combines the records of the business with the personal records of the
owner.
4 d.is classified as a separate legal entity.
All of the following are advantages for choosing a proprietorship for
a business except
1 a.a proprietorship is a simple form of business to set up.
2 b.a proprietorship gives the owner control of the business.
3 c.proprietorship receive more favorable tax treatment.
4 d.transfer of ownership is easily achieved through stock sales.
Trang 5Jack and Jill form a partnership Jack runs the business in New York, while Jill vacations in Hawaii During the time Jill is away from the business, Jack increases the debts of the business by $20,000 Which of the following statements is true regarding this debt?
1 a.Only Jack is personally liable for the debt, since he has been the managing partner during that time.
2 b.Only Jill is personally liable for the debt of the business, since Jack has been working and she has not.
3 c.Both Jack and Jill are personally liable for the business debt.
4 d.Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity.
Which of the following would not be considered an external user of accounting data for the Julian Company?
1 a.Internal Revenue Service agent
2 b.Management
3 c.Creditors
4 d.Customers
Which of the following is not a step for solving an ethical dilemma?
1 a.Identifying the alternatives and weighing the impact of each alternative on various stakeholders.
2 b.Certifying the ethical accuracy of the financial information.
3 c.Identifying and analyzing the principal elements in the situation.
4 d.Recognizing the ethical situation and issues involved.
Which of the following groups uses accounting information to
determine whether a marketing proposal will be cost effective?
1 a.Investors in common stock
2 b.Marketing managers
3 c.Creditors
4 d.Chief Financial Officer
Which of the following groups uses accounting information to
determine whether the company can pay its obligations?
1 a.Investors in common stock
2 b.Marketing managers
3 c.Creditors
4 d.Chief Financial Officer
Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
1 a.Reduced legal liability for investors
2 b.Harder to transfer ownership
Trang 63 c.Lower taxes
4 d.Most common form of organization
Which of the following statements concerning users of accounting information is incorrect?
1 a.Management is considered an internal user.
2 b.Present creditors are considered external users.
3 c.Regulatory authorities are considered internal users.
4 d.Taxing authorities are considered external users.
A small neighborhood barber shop that is operated by its owner would likely be organized as a
1 a.No personal liability
2 b.Easy to transfer ownership
3 c.Favorable tax treatment
4 d.Easy to raise funds
Most business enterprises in the United States are
1 a.proprietorships and partnerships.
1 a.Forecasts of cash needs for next year.
2 b.Financial comparisons of operating activity alternatives.
3 c.Both forecasts of cash needs and financial comparisons are internal reports.
4 d.Neither forecasts of cash needs or financial comparisons is an internal report.
A business organized as a separate legal entity is a
1 a.corporation.
2 b.proprietor.
3 c.government unit.
4 d.partnership.
Trang 7134 Free Test Bank for Financial Accounting Tools for Business Decision Making 7th Edition by Kimmel
Multiple Choice Questions - Page 2
Gibson Company recorded the following cash transactions for the year: Paid $180,000 for salaries; Paid $80,000 to purchase office equipment; Paid $20,000 for utilities; Paid $8,000 in dividends; Collected $310,000 from customers What was Gibson’s net cash provided by operating activities?
1 a.$110,000
2 b.$30,000
3 c.$130,000
4 d.$102,000
The best definition of assets is the
1 a.cash owned by the company.
2 b.collections of resources belonging to the company and the claims on these resources.
3 c.owners’ investment in the business.
4 d.resources belonging to a company that have future benefit to the company.
Which of the following activities involves collecting the necessary funds to support the business?
When expenses exceed revenues, which of the following is true?
1 a.a net loss results
Trang 82 b.a net income results
3 c.assets equal liabilities
4 d.assets are increased
The financial statement that summarizes the changes in retained earnings for a specific period of time is the
1 a.balance sheet.
2 b.income statement.
3 c.statement of cash flows.
4 d.retained earnings statement.
Dividends paid
1 a.increase assets.
2 b.increase expenses.
3 c.decrease revenues.
4 d.decrease retained earnings.
Expenses are incurred
1 a.only on rare occasions.
2 b.to produce assets.
3 c.to produce liabilities.
4 d.to generate revenues.
Which of the following is not a liability?
1 a.Unearned Service Revenue
2 b.Accounts Payable
3 c.Accounts Receivable
4 d.Interest Payable
Which of the following statements is true?
1 a.Amounts received from issuing stock are revenues.
2 b.Amounts paid out as dividends are not expenses.
3 c.Amounts paid out as dividends are reported on the income statement.
4 d.Amounts received from issued stock are reported on the income statement.Jackson Company recorded the following cash transactions for the year: Paid $135,000 for salaries; Paid $60,000 to purchase office equipment; Paid $15,000 for utilities; Paid $6,000 in dividends; Collected $245,000 from customers; What was Jackson’s net cash provided by operating activities?
1 a.$95,000
2 b.$35,000
3 c.$110,000
4 d.$89,000
Trang 9The common characteristic possessed by all assets is
1 a.long life.
2 b.great monetary value.
3 c.tangible nature.
4 d.future economic benefit.
Dividends are reported on the
1 a.income statement.
2 b.retained earnings statement.
3 c.balance sheet.
4 d.income statement and balance sheet.
The cost of assets consumed or services used is also known as
1 a.a revenue.
2 b.an expense.
3 c.a liability.
4 d.an asset.
Ending retained earnings for a period is equal to beginning
1 a.Retained earnings + Net income + Dividends
2 b.Retained earnings – Net income – Dividends
3 c.Retained earnings + Net income – Dividends
4 d.Retained earnings – Net income + Dividends
Which of the following financial statements is divided into major categories of operating, investing, and financing activities?
1 a.The income statement.
2 b.The balance sheet.
3 c.The retained earnings statement.
4 d.The statement of cash flows.
Borrowing money is an example of a(n)
Trang 101 a.nowhere on the statement.
2 b.in the operating activities section.
3 c.in the investing activities section.
4 d.in the financing activities section.
Buying assets needed to operate a business is an example of a(n)
Trang 111 a.Mortgage payable
2 b.Investments
3 c.Common stock
4 d.Retained earnings
The retained earnings statement shows all of the following except
1 a.the amounts of changes in retained earnings during the period.
2 b.the causes of changes in retained earnings during the period.
3 c.the time period following the one shown for the income statement.
4 d.beginning retained earnings on the first line of the statement.
Debts and obligations of a business are referred to as
Multiple Choice Questions - Page 3
Finney Company began the year by issuing $40,000 of common stock for cash The company recorded revenues of $370,000, expenses of $320,000, and paid dividends of $20,000 What was Finney’s net income for the year?
1 a.$30,000
2 b.$70,000
3 c.$50,000
4 d.$90,000
The retained earnings statement
1 a.summarizes the changes in retained earnings for a specific period of time.
2 b.reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
3 c.reports the assets, liabilities, and stockholders’ equity at a specific date.
4 d.presents the revenues and expenses for a specific period of time.
If the retained earnings account decreases from the beginning of the year to the end of the year, then
1 a.net income is less than dividends.
2 b.there was a net income and no dividends.
3 c.additional investments are less than net losses.
4 d.net income is greater than dividends.
Trang 12Gilkey Corporation began the year with retained earnings of
$465,000 During the year, the company issued $630,000 of
common stock, recorded expenses of $1,800,000, and paid
dividends of $120,000 If Gilkey’s ending retained earnings was
$495,000, what was the company’s revenue for the year?
1 a.I’ve been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets.
2 b.You are right Revenues and expenses are shown on the income statement Dividends are a cost of generating revenues and that makes them an expense Why else would a corporation pay dividends?
3 c.Dividends represent a portion of corporate profits that are paid to the
shareholders They belong on the retained earnings statement.
4 d.Dividends are deducted from retained earnings on the balance sheet.
Pinson Company began the year with retained earnings of
$570,000 During the year, the company recorded revenues of
$600,000, expenses of $380,000, and paid dividends of $140,000 What was Pinson’s retained earnings at the end of the year?
1 a.$930,000
2 b.$650,000
3 c.$1,030,000
4 d.$500,000
Net income will result during a time period when
1 a.assets exceed liabilities.
2 b.assets exceed revenues.
3 c.expenses exceed revenues.
4 d.revenues exceed expenses.
Kilmer Corporation began the year with retained earnings of
$620,000 During the year, the company issued $840,000 of
common stock, recorded expenses of $2,400,000, and paid
dividends of $160,000 If Kilmer’s ending retained earnings was
$660,000, what was the company’s revenue for the year?
1 a.$2,440,000
Trang 132 b.$2,600,000
3 c.$3,280,000
4 d.$33,440,000
The accounting equation may be expressed as
1 a.Assets = Stockholders’ Equity – Liabilities.
2 b.Assets = Liabilities + Stockholders’ Equity.
3 c.Assets + Liabilities = Stockholders’ Equity.
4 d.Assets + Stockholders’ Equity = Liabilities.
If total liabilities decreased by $50,000 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?
3 c.retained earnings statement.
4 d.statement of cash flows.
Henson Company began the year with retained earnings of
$330,000 During the year, the company recorded revenues of
$500,000, expenses of $380,000, and paid dividends of $40,000 What was Henson’s retained earnings at the end of the year?
1 a.$490,000
2 b.$410,000
3 c.$790,000
4 d.$450,000
To show how successfully your business performed during a period
of time, you would report its revenues and expenses in the
1 a.balance sheet.
2 b.income statement.
3 c.statement of cash flows.
4 d.retained earnings statement.
Jimmy’s Repair Shop started the year with total assets of $200,000 and total liabilities of $160,000 During the year the business
recorded $420,000 in revenues, $220,000 in expenses, and