138 free test bank for financial accounting 10th edition

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138 Free Test Bank for Financial Accounting 10th

Edition

by Harrison

Multiple Choice Questions

The two types of accounting are:

1. A) profit and nonprofit

2. B) financial and managerial

3. C) internal and external

4. D) bookkeeping and decision-oriented

Which of the following statements is TRUE for a limited liability partnership?

1. A) The partnership pays no federal income taxes

2. B) Only the limited partners pay federal income taxes on their shares of the partnership's profits

3. C) Only the general partner pays federal income taxes on his or her share of the partnership's profits

4. D) Only the members pay federal income taxes on their shares of the

2. B) IFRS is more "rules-based" than GAAP

3. C) The FASB and the IASB are working towards convergence of standards

4. D) The SEC will require all companies to use IFRS beginning in 2013

To be useful, accounting information must have the fundamental qualitative characteristics of:

1. A) comparability and relevance

2. B) relevance and faithful representation

3. C) materiality and understandability

4. D) faithful representation and timeliness

An important fact to consider when determining how to organize a business is that:

1. A) members of an LLC have unlimited liability and are taxed like members of

a partnership

2. B) for accounting purposes, a proprietorship is a distinct entity from the

proprietor

3. C) the records of a partnership can include each partner's personal assets and debts.

4. D) the proprietor and the proprietorship are separate legal entities

Federal income taxes are paid by in a limited liability company

1. A) the company

2. B) limited partners only

3. C) general partners only

4. D) members

Information must be sufficiently transparent so that it makes sense

to reasonably informed users of the financial statements, such as creditors This qualitative characteristic of information is called:

2. B) members of a limited liability company

3. C) limited partners in a limited liability partnership

4. D) general partner in a limited liability partnership

A disadvantage of general partnerships is:

1. A) double taxation of distributed profits

2. B) the partnership's assets are commingled with each partner's personal assets

3. C) state rules and regulations must be followed

4. D) each partner may conduct business in the name of the entity and make agreements that legally bind all partners

Which of the following statements is TRUE for a limited liability partnership?

1. A) The partners all have limited liability for the debts of the partnership

2. B) The partners all have limited liability for the acts of the other partners.

3. C) The general partner has unlimited liability for the debts of the partnership

4. D) The limited partners have unlimited liability for the debts of the partnership

Which statement is FALSE?

1. A) International Financial Reporting Standards are used by many countries in the world

2. B) U.S Generally Accepted Accounting Principles are used by many countries

1. A) have limited liability for the corporation's debts

2. B) have unlimited liability for the corporation's debts

3. C) have unlimited liability for the actions of other stockholders

4. D) receive dividends from the corporation without having to pay tax on the distribution

Which of the following entities pays federal income taxes?

1. A) limited liability partnership

2. B) general partnership

3. C) limited liability company

4. D) corporation

The process of verifying accounting information in financial

statements is undertaken by:

1. A) the Securities and Exchange Commission

2. B) internal auditors only

3. C) external auditors only

4. D) internal and external auditors

Which of the following statements is FALSE?

1. A) The Securities and Exchange Commission is investigating whether all U.S public companies should adopt International Financial Reporting Standards

2. B) The advantage of a uniform set of global accounting standards is that financial statements from a U.S company will be comparable to those of a foreign company

3. C) In the long run, a uniform set of global accounting standards will reduce the costs of doing business globally

4. D) With a uniform set of global accounting standards, companies will have to produce multiple versions of their financial statements

All of the following are true statements about the entity assumption EXCEPT for:

1. A) the entity assumption draws a sharp boundary around each entity.

2. B) the transactions of the business cannot be combined with the transactions

of the owner

3. C) the entity assumption ensures that the business will continue indefinitely

4. D) under the entity assumption, the entity is any organization that stands apart

as a separate economic unit

Owners of an LLC are called:

4. D) The entity assumption applies to all the above

Advantages of a corporation include:

1. A) each stockholder can enter into agreements that legally bind all the

stockholders

2. B) the double taxation of distributed profits

3. C) limited liability of the stockholders for the corporation's debts

4. D) each stockholder can conduct business in the name of the corporation

Enhancing qualitative characteristics of accounting information do NOT include:

3. C) Net income and loss of the partnership "flows through" to the partners

4. D) The partnership agreement must be in writing

The is elected by the stockholders and is responsible for setting policy and appointing officers

1. A) board of directors

2. B) chief executive officer (CEO)

3. C) chief financial officer (CFO)

4. D) advisory council

Which of the following statements is TRUE for a proprietorship?

1. A) Legally, a proprietorship is separate from the proprietor

2. B) For accounting purposes, a proprietorship is separate from the proprietor

3. C) For accounting purposes, a proprietorship is not separate from the

proprietor

4. D) A and B

The fair value of a plant asset is equal to:

1. A) the amount the business could sell the asset for

2. B) the amount of cash paid plus the dollar value of noncash consideration given in exchange for the plant asset at acquisition

3. C) the amount of cash paid plus the loan taken out to finance the purchase of the plant asset

4. D) the amount a company can receive for the asset when sold in order to go out of business

Which of the following statements is TRUE for a limited liability

company?

1. A) Members have unlimited liability for the debts of the business

2. B) Members have limited liability for the debts of the business

3. C) Only the limited partners have limited liability for the debts of the business

4. D) The general partner has unlimited liability for the debts of the business

In 1960, Johnson Company purchased a building for $100,000 In

2013, a real estate professional says the building has a fair value of

$1,000,000 In 2013, a similar building down the street recently sold for $900,000 What value is reported for the building on the balance sheet at December 31, 2013?

1. A) $100,000

2. B) $550,000

3. C) $900,000

4. D) $1,000,000

Which statement is TRUE about partnerships?

1. A) Legally, a partnership is separate from the partners

2. B) A partnership has one capital account

3. C) For accounting purposes, a partnership is separate from the partners

4. D) For accounting purposes, a partnership is not separate from the partners

In order to compare the financial statements of Toyota Corporation

to the financial statements of General Motors, it would be preferable

to use _

1. A) U.S Generally Accepted Accounting Principles for General Motors and International Financial Reporting Standards for Toyota

2. B) U.S Generally Accepted Accounting Principles for both companies

3. C) International Financial Reporting Standards for both companies

4. D) U.S Generally Accepted Accounting Principles for Toyota Corporation and International Financial Reporting Standards for General Motors

Characteristics of faithfully representative information do NOT

1. A) cost benefit constraint

2. B) the Internal Revenue Service

3. C) the Securities and Exchange Commission

4. D) all of the above

The International Accounting Standards Board is responsible for establishing:

1. A) the code of professional conduct for accountants

2. B) the Securities and Exchange Commission

3. C) Generally Accepted Accounting Principles used in the United States

4. D) International Financial Reporting Standards

Accounting:

1. A) measures business activities

2. B) processes data into reports and communicates the data to decision

makers

3. C) is often called the language of business

4. D) is all of the above

138 Free Test Bank for Financial Accounting 10th

Edition by Harrison Multiple Choice Questions - Page 2

Census Company had the following accounts and balances at the end of the year What are total liabilities at the end of the year?Cash

$74,000; Accounts Payable $12,000; Common Stock $21,000; Cost

of Goods Sold $85,000; Dividends Declared and Paid $12,000;

Operating Expenses $12,000; Accounts Receivable $50,000;

Inventory $40,000; Long-term Notes Payable $33,000; Revenues

Which of the following statements is TRUE?

1. A) Dividends are expenses of a business

2. B) Dividends reduce retained earnings

3. C) Dividends increase retained earnings

4. D) Dividends reduce net income

The principle stating that assets acquired by the business should be recorded at their actual cost on the date of purchase is the:

1. A) historical cost principle

2. B) objectivity principle

3. C) reliability principle

4. D) stable dollar principle

Golden Company had the following accounts and balances at the end of the year What are total assets at the end of the year?Cash

$74,000; Accounts Payable $12,000; Common Stock $21,000; Cost

of Goods Sold $85,000; Dividends Declared and Paid $12,000;

Operating Expenses $12,000; Accounts Receivable $50,000;

Inventory $40,000; Long-term Notes Payable $33,000; Revenues

headquartered Which of these properties is considered an asset(s)

of the business?

1. A) Only the vacation home in Hawaii

2. B) Only the factory in Detroit

3. C) Both the vacation home in Hawaii and the factory in Detroit

4. D) Neither the vacation home in Hawaii nor the factory in Detroit

At the end of the current accounting period, account balances were

as follows: Cash, $25,000; Accounts Receivable, $40,000; Common Stock, $18,000; Retained Earnings, $14,000 Liabilities for the

Which of the following must be added to beginning Retained

Earnings to compute ending Retained Earnings?

1. A) Net income

2. B) Expenses

3. C) Dividends

4. D) All of the above

The accounting assumption that states that the business, rather than its owners, is the reporting unit is the:

1. A) entity assumption

2. B) going concern assumption

3. C) stable-monetary-unit assumption

4. D) historical cost assumption

Revenues were $150,000, expenses were $140,000, and cash

dividends declared and paid were $5,000 What was the net income and the change in retained earnings for the period?

1. A) Net income was $10,000; the change in retained earnings was $10,000

2. B) Net income was $150,000; the change in retained earnings was $15,000

3. C) Net income was $10,000; the change in retained earnings was $5,000

4. D) Net income was $150,000; the change in retained earnings was $145,000

An entity's equity consists of two accounts, Amy Jones, Capital, and Mindy Lenz, Capital This indicates the entity is a:

1. A) proprietorship

2. B) corporation

3. C) not-for-profit

4. D) partnership.

On January 1, 2015, total assets for Wininger Technologies were

$135,000; on December 31, 2015, total assets were $155,000 On January 1, 2015, total liabilities were $110,000; on December 31,

2015, total liabilities were $115,000 What is the amount of the

change and the direction of the change in Wininger Technologies' stockholders' equity for 2015?

1. A) Decrease of $15,000

2. B) Increase of $15,000

3. C) Increase of $30,000

4. D) Decrease of $30,000

The owners' equity of any business is equal to:

1. A) revenues minus expenses

2. B) assets minus liabilities

3. C) assets plus liabilities

4. D) paid-in capital plus assets

Expenses of a business include:

1. A) sales and cash equivalents

2. B) common stock and rent expense

3. C) cost of goods sold and salaries expense

4. D) retained earnings and utilities expense

The relevant measure of the value of the assets of a company that

is going out of business is the:

Another way to state the accounting equation is:

1. A) Assets = Liabilities + Paid-in Capital - Common Stock

2. B) Assets + Liabilities = Stockholders' Equity.

3. C) Assets = Liabilities + Paid-in Capital + Retained Earnings

4. D) Assets = Liabilities - Paid-in Capital - Dividends

Property, plant and equipment does NOT include:

The accounting equation can be stated 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 = Zero

The major types of transactions that affect retained earnings are:

1. A) paid-in capital and common stock

2. B) assets and liabilities

3. C) revenues, expenses, and dividends

4. D) revenues and liabilities

Which of the following increases retained earnings?

2. B) occurs when total revenues are less than total expenses

3. C) is often referred to as the "bottom line" on an income statement

4. D) decreases total stockholders' equity

3. C) increases in retained earnings resulting from delivering goods or services

to customers

4. D) decreases in retained earnings resulting from delivering goods or services

to customers

Verifiability means that the information:

1. A) is timely and understandable

2. B) is understandable

3. C) must be capable of being checked for accuracy, completeness and

reliability

4. D) is material and relevant

When total expenses exceed total revenues, the result is:

1. A) a net profit

2. B) a net loss

3. C) a dividend

4. D) excess cash

The assets of a company:

1. A) must equal the liabilities of the company

2. B) include property, plant, and equipment and accounts payable

3. C) represent economic resources that are expected to produce a future benefit

4. D) include short-term investments and notes payable

Net income is computed as:

1. A) revenues - expenses - dividends

2. B) revenues + expenses

3. C) revenues - expenses

4. D) revenues - expenses + dividends

Liabilities are:

1. A) a form of paid-in capital

2. B) future economic benefits to which a company is entitled

3. C) debts payable to outsiders called creditors

4. D) the outflow of resources that decrease common stock

If a company prepares its financial statements three years after the end of their accounting period, they have violated the qualitative characteristic of:

1. A) accounts payable and dividends.

2. B) accounts payable and common stock

3. C) investments and note payable

4. D) accounts payable and note payable

The stable monetary unit assumption:

1. A) ensures that accounting records and statements are based on the most reliable data available

2. B) holds that the entity will remain in operation for the foreseeable future

3. C) maintains that each organization or section of an organization stands apart from other organizations and individuals

4. D) enables accountants to ignore the effect of inflation on the accounting records

All of the following are expenses EXCEPT for:

1. A) Cost of Goods Sold

2. B) Depreciation Expense

3. C) Salary Expense

4. D) Dividends

Historical cost:

1. A) is determined for each asset on a yearly basis

2. B) is equal to the amount of cash paid less the dollar value of all non-cash consideration given in the exchange

3. C) is a verifiable measure that is relatively free from bias

4. D) is the amount that the business could sell the asset for

138 Free Test Bank for Financial Accounting 10th

Edition by Harrison Multiple Choice Questions - Page 3

The balance sheet is also known as the:

1. A) statement of profit and loss

2. B) operating statement

3. C) assets statement

4. D) statement of financial position

The balance sheet contains the:

1. A) amount of net income or net loss

2. B) beginning balance in retained earnings

3. C) ending balance in retained earnings

4. D) amount of cash dividends paid to stockholders

The net income shown on the income statement also appears on the:

1. A) balance sheet and operations statement