137 test bank for financial accounting information for decisions 6th edition

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137 Test Bank for Financial Accounting Information for Decisions 6th Edition

by Wild Mutiple Choice Questions-Page 1

The accounting guideline prescribing that financial statement

information be supported by independent, unbiased evidence other than someone's belief or opinion is the:

1 A Business entity principle

2 B Monetary unit principle

3 C Going-concern principle

4 D Cost principle

5 E Measurement principle

The principle that (1) requires revenue to be recognized at the time

it is earned, (2) allows the inflow of assets associated with revenue

to be in a form other than cash and (3) measures the amount of revenue as the cash plus the cash equivalent value of any non-cashassets received from customers in exchange for goods or services

5 E Business entity principle

Which of the following elements are found on the income

statement?

1 A Cash

2 B Accounts Receivable

3 C Common Stock

4 D Retained Earnings

5 E Salaries Expense

Revenue is properly recognized:

1 A When the customer's order is received

2 B Only if the transaction creates an account receivable

3 C At the end of the accounting period

4 D Upon completion of the sale or when services have been performed and the business obtains the right to collect the sale price

5 E When cash from a sale is received

Which of the following accounting principles would prescribe that allgoods and services purchased is recorded at cost?

4 D Business entity principle

5 E Revenue recognition principle

The organization that attempts to create more harmony among the accounting practices of different countries by identifying preferred practices and encouraging their worldwide acceptance is the:

An example of a financing activity is:

1 A Buying office supplies

2 B Obtaining a long-term loan

3 C Buying office equipment

4 D Selling inventory

5 E Buying land

Recording the items on the financial statements in dollars is:

1 A Objectivity principle

2 B Monetary unit principle

3 C Revenue recognition principle

Which accounting assumption assumes that all accounting

information is reported monthly or yearly?

1 A Business entity assumption

2 B Monetary unit assumption

3 C Value assumption

4 D Cost assumption

5 E Time period assumption

On December 15, 2010, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2011 Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2011 and not 2010?

1 A Monetary unit principle

2 B Going-concern principle

3 C Cost principle

4 D Business entity principle

5 E Revenue recognition principle

Marian Mosely is the owner of Mosely Accounting Services Which accounting assumption requires Marian to keep her personal

financial information separate from the financial information of

Mosely Accounting Services?

1 A Monetary unit assumption

2 B Going-concern assumption

3 C Cost assumption

4 D Business entity assumption

5 E None of these Since Marian is a sole proprietor, she is not required to separate her personal financial information from the financial information of Mosely Accounting Services

An Asset is:

1 A only acquired with cash

2 B something the company owns

3 C only contributed by stockholders

4 D a company’s obligation to pay

5 E is also called contributed capital

A corporation:

1 A Is a legal entity separate and distinct from its owners

2 B Must have many owners

3 C Has shareholders who have unlimited liability for the acts of the corporation

4 D Is the same as a limited liability partnership

5 E Does not have to pay taxes

Which of the following elements are found on the Balance Sheet?

1 A Service Revenue

2 B Net Income

3 C Operating Activities

4 D Utilities Expense

5 E Retained Earnings

The primary objective of financial accounting is:

1 A To serve the decision-making needs of internal users

2 B To provide financial statements to help external users analyze and interpret

an organization's activities

3 C To monitor and control company activities

4 D To provide information on both the costs and benefits of managing

products and services

5 E To know what, when and how much to produce

The Maximum Experience Company acquired a building for

$500,000 Maximum Experience had an appraisal done and found that the building was worth $575,000 The seller had paid $300,000 for the building 6 years ago Which accounting principle would

prescribe that Maximum Experience record the building on its

records at $500,000?

1 A Monetary unit principle

2 B Going-concern principle

3 C Cost principle

4 D Business entity principle

5 E Revenue recognition principle

The principle prescribing that financial statements reflect the

assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue

is the:

1 A Going-concern principle

2 B Business entity principle

3 C Objectivity principle

4 D Cost Principle

5 E Monetary unit principle

To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the:

1 A Objectivity principle

2 B Realization principle

3 C Business entity principle

4 D Going-concern principle

5 E Revenue recognition principle

An example of an operating activity is:

1 A Paying wages

2 B Purchasing office equipment

3 C Borrowing money from a bank

4 D Selling stock

5 E Paying off a loan

Which of the following accounting principles dictates when

expenses are recognized?

1 A Revenue recognition principle

2 B Monetary unit principle

3 C Business entity principle

4 D Matching principle

5 E Full disclosure principle

According to generally accepted accounting principles, a company'sbalance sheet should show the company's assets at:

1 A The cash equivalent value of what was given up

2 B The current market value of the assets at the balance sheet date

3 C The cash paid to acquire them, even if something other than cash was given in the exchange

4 D The best estimate from a certified internal auditor

5 E The objective value to external users

Which of the following statements is true of external information users?

1 A They are directly involved in managing the organization

2 B Their needs are met by the managerial area of accounting

3 C They have limited access to an organization's accounting information

4 D They use accounting information to help improve the efficiency and

$140,000 and purchased for $137,000 The land should be

recorded in the purchaser's books at:

1 A Includes a general partner with unlimited liability

2 B Is subject to double taxation

3 C Has owners called stockholders

4 D Is the same as a corporation

5 E Must only have two partners

Which of the following statements best describes the relationship of U.S GAAP and IFRS?

1 A They are identical

2 B They are entirely different conceptual frameworks

3 C They are similar but not identical

4 D Neither has anything to do with accounting

5 E They both relate only to publicly traded companies

The International Accounting Standards Board (IASB)

1 A Hopes to create harmony among accounting practices of different countries

2 B Is the government group that establishes reporting requirements for

companies that issue stock to the public

3 C Has the authority to impose its standards on companies

4 D Is the only source of U.S generally accepted accounting principles (GAAP)

5 E Applies only to companies that are members of the European Union

Internal users of accounting information always include:

Businesses can take all of the following forms except:

1 A Has replaced accounting

2 B Has not changed the work that accountants do

3 C Has freed accounting professionals to concentrate more on the analysis and interpretation of information

4 D In accounting has replaced the need for decision makers

5 E In accounting is only available to large corporations

The objectivity principle:

1 A Means that information is supported by independent, unbiased evidence

2 B Means that information can be based on what the preparer thinks is true

3 C Means that financial statement should contain information that is optimistic

4 D Means that a business may not recognize revenue until cash is received

5 E Means the assets acquired must be recorded and what the company paid for them

Congress passed the Sarbanes-Oxley Act to

1 A Provide jobs to U.S accountants and limit the number of jobs sent outside the country

2 B Impose penalties on CEO's and CFO's who knowingly sign off on bogus accounting reports, although at this time the penalties are token amounts

3 C Help curb financial abuses at companies that issue their stock to the public

4 D Force auditors to attest to the absolute accuracy of the financial statements

5 E Require that all companies publicly disclose their internal control plansThe accounting principle that requires accounting information to be based on actual cost and requires assets and services to be

recorded initially at the amount of cash or cash-equivalent given in exchange is the:

1 A Is a concern for the impact of one's actions on society as a whole

2 B Is a code that helps in dealing with confidential information

3 C Is required by the SEC

4 D Requires that all businesses conduct social audits

5 E Is mandated by the federal government

Ethical behavior requires:

1 A That an auditors' pay not depend on the figures in the client's reports

2 B Auditors to invest in businesses they audit

3 C Analysts to report information favorable to their companies

4 D Managers to use accounting information to benefit themselves

5 E That an auditor provides a favorable opinion

Identifying business activities requires selecting transactions and events relevant to an organization Which of the following events would be recorded in the accounting records of Acme Car Wash?

1 A Acme washes 500 cars

2 B J.B Smith, a customer, buys lunch at the restaurant next door to Acme while waiting for her car to be washed

3 C Clean Company, a supplier, sells 50 pounds of soap to ABC Company

4 D Sudsey Company, a supplier, goes out of business

5 E Acme hires Andrea as a receptionist

Generally Accepted Accounting Principles:

1 A Focus on the review of a situation

2 B Does not require financial statements

3 C Never change

4 D Intend to make information on the financial statements relevant, reliable and comparable

5 E Oversees Security and Exchange Commission

Which of the following is the primary purpose of accounting?

1 A To establish a business

2 B To identify, record and communicate business transactions

3 C To deceive stockholders

4 D To keep from paying taxes

5 E To establish credit for a company

A partnership:

1 A Is also called a sole proprietorship

2 B Has unlimited liability

3 C Has to have a written agreement in order to be legal

4 D Is a legal organization separate from its owners

5 E Has owners called shareholders

The financing functions of a business include:

1 A Research and development

2 B Purchasing

3 C Marketing

4 D Distribution

5 E Selling common stock

Which of the following is the correct sequence for the heading for ABC Company’s 2010 Balance Sheet?

1 A ABC Company, For the year ended 12/31/10, Balance Sheet

2 B For the year ended 12/31/10, Balance Sheet, ABC Company

3 C Balance Sheet, 12/31/10, ABC Company

4 D 12/31/10, ABC Company, Balance Sheet

5 E ABC Company, Balance Sheet, 12/31/10

The question of when revenue should be recognized on the income statement (according to GAAP) is addressed by the:

1 A Revenue recognition principle

2 B Going-concern principle

3 C Objectivity principle

4 D Business entity principle

5 E Cost principle

The area of accounting aimed at serving the decision making needs

of internal users is:

in the amounts of $75,000; $52,000; and $23,000 respectively What is the total amount of the corporation's assets after this

transaction has been recorded?

1 A $115,000

2 B $111,000

3 C $79,000

4 D $71,000

5 E $75,000

An example of an investing activity is:

1 A Paying wages of employees

2 B Paying dividends

3 C Purchasing land

4 D Selling inventory

5 E Contribution from owner

If assets are $365,000 and equity is $120,000, then liabilities are:

Fast-Forward has net income of $18,955 and assets at the

beginning of the year of $200,000 Its assets at the end of the year total $246,000 Compute its return on assets

$75,000 The effects of this transaction include:

1 A Assets increase by $75,000 and expenses increase by $75,000

2 B Assets increase by $75,000 and expenses decrease by $75,000

3 C Liabilities increase by $75,000 and expenses decrease by $75,000

4 D Assets decrease by $75,000 and expenses decrease by $75,000

5 E Assets increase by $75,000 and liabilities increase by $75,000

A company has twice as much owner's equity as it does liabilities Iftotal liabilities are $50,000, what amounts of assets are owned by the company?

1 A $50,000

2 B $100,000

3 C $150,000

4 D $200,000

5 E Cannot be determined from the given information

Our company has three times as many assets as it does liabilities Iftotal liabilities are $55,000, what is the amount of owners' equity?

1 A Increase retained earnings

2 B Are increases in retained earnings from a company's earning activity

3 C Are the costs of assets or services used to earn revenues

4 D Occur when retained earnings exceed revenue

5 E Are creditor's claims on assets

Compute return on assets given net income of $13,764, beginning assets of $120,000 and ending assets of $176,000

3 C 9.3%

4 D 11.47%

5 E 21.51%

U.S government bonds are:

1 A High-risk and high-return investments

2 B Low-risk and low-return investments

3 C High-risk and low-return investments

4 D Low-risk and high-return investments

5 E High risk and no-return investments

Net income is:

1 A Assets minus liabilities

2 B The excess of revenues over expenses

3 C An asset

4 D The same as revenue

5 E The excess of expenses over retained earnings

The description of the relation between a company's assets, liabilities and equity, which is expressed as Assets = Liabilities + Equity is known as the:

1 A Income statement equation

1 A They are economic resources owned or controlled by the business

2 B They are expected to provide future benefits to the business

3 C They appear on the balance sheet

4 D They appear on the statement of retained earnings

5 E Claims on them are shared between creditors and owners

Decreases in retained earnings that represent costs of assets or services that are used to earn revenues are called:

4 D Are also called asset management

5 E Are also called strategic management

How would the accounting equation of Boston Company be affected

by the billing of a client for $10,000 of consulting work completed?

1 A +$10,000 accounts receivable, -$10,000 accounts payable

2 B +$10,000 accounts receivable, +$10,000 accounts payable

3 C +$10,000 accounts receivable, +$10,000 cash

4 D +$10,000 accounts receivable, +$10,000 consulting revenue

5 E +$10,000 accounts receivable, -$10,000 consulting revenue

Beta Corporation purchased $100,000 worth of land by paying

10,000 cash and signing a $90,000 mortgage Immediately prior to this transaction the corporation had assets, liabilities and owners'