140 test bank for financial accounting information for decisions 7th edition

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140 Test Bank for Financial Accounting Information for Decisions 7th Edition

by Wild

Multiple Choice Questions

Technological advancement

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

Net income:

1. A Occurs when revenues exceed expenses

2. B Is the same as revenue

3. C Equals resources owned or controlled by a company

4. D Occurs when expenses exceed assets

5. E Represents assets taken from a company for an owner's personal use

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

The question of when revenue should be recognized on the

income statement (according to GAAP) is addressed by the:

1. A Revenue recognition principle

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

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 plans

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

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

5. E Limited liability corporation

If equity is $300,000 and liabilities are $192,000, then assets equal:

An example of an investing activity is:

1. A Paying wages of employees

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 is the primary purpose of accounting?

1. A To establish a business

2. B To identify, record, and communicate business transactions

3. C To earn a large profit

4. D To reduce taxes owed for the business

5. E To establish credit for a company

According to generally accepted accounting principles, a

company's balance 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

If liabilities are $51,500 and assets are $173,425, then equity equals:

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 creditors' claims on assets

An example of an operating activity is:

1. A Paying wages

2. B Purchasing office equipment

3. C Borrowing money from a bank

3. C Equals assets minus liabilities.

4. D Is the excess of revenues over expenses

5. E Represents the owners' claims against assets

Which of the following elements are found on the balance sheet?

Why are ethics crucial to accounting?

1. A Ethical behavior creates the most profit for the business

2. B Ethics are a tool that helps the accountants balance the accounting equation

3. C For accounting information to be useful, it must be trusted and therefore the result of ethical decisions

4. D Ethics are important to consider when applying GAAP, but do not apply

to international accounting issues

5. E Ethics are a way to compute revenues and expenses, but they do not apply to assets, liabilities, and owners’ equity

Creditors' claims on the assets of a company are called:

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

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

The distribution of assets to stockholders is called a(n):

Which of the following statements is not true about assets?

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

The major activities of a business include:

1. A Operating, investing, making a profit

2. B Investing, making a profit, operating

3. C Making a profit, operating, borrowing

4. D Operating, investing, financing

5. E Investing, making a profit, financing

Revenues are:

1. A The same as net income

2. B The excess of expenses over assets

3. C Resources owned or controlled by a company.

4. D Increases in retained earnings from a company's earning activities

5. E The costs of assets or services used

Which accounting assumption assumes that all accounting

information can be 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

The primary objective of financial accounting is to:

1. A Serve the decision-making needs of internal users

2. B Provide financial statements to help external users analyze and interpret

an organization's activities

3. C Monitor and control company activities

4. D Provide information on both the costs and benefits of managing productsand services

5. E Know what, when and how much to produce

Which of the following elements are found on the income

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 at what the company paid for them

What is the opportunity component of the fraud triangle?

1. A A person thinks that there is a way to commit fraud without much chance

of getting caught

2. B A person has a really good reason to commit fraud

3. C A person does not think of the fraudulent activity as bad

4. D A person persuades two or more other people to assist with the fraud

5. E A person is concerned about the impact of their actions on society

The owners of a partnership:

1. A Have created an entity that can also be called a sole proprietorship

2. B Have unlimited liability

3. C Have to have a written agreement in order to be legal

4. D Have created a legal organization separate from its owners

5. E Are called shareholders

Generally accepted accounting Principles:

1. A Focus on the review of a situation

2. B Do 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

On December 15, 2013, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in

2014 Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2014 and not 2013?

1. A Monetary unit principle

2. B Going-concern principle

3. C Cost principle

4. D Business entity principle

5. E Revenue recognition principle

Internal users of accounting information include:

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

A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth

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

recorded in the purchaser's books at:

Resources owned or controlled by a company that are expected

to yield benefits are:

The 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 Accounting equation

2. B Cost principle

3. C Going-concern principle

4. D Realization principle

5. E Business entity principle

Our company has three times as many assets as it does

liabilities If total liabilities are $55,000, what is the amount of owners' equity?

1. A $55,000

2. B $110,000

5. E Owners’ equity cannot be determined from the given information

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 six 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

Planning activities:

1. A Are the means organizations must use to pay for resources

2. B Involve the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

3. C Involve defining the ideas, goals, and actions of an organization

4. D Are the carrying out of an organization's plans

5. E Involve using resources to research, develop, purchase, produce, and market products and services

Operating activities:

1. A Are the means organizations must use to pay for resources like land, buildings, and equipment

2. B Involve using resources to research, develop, purchase, produce,

distribute, and market products and services

3. C Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services

4. D Are also called asset management

5. E Are also called strategic management

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

Increases in retained earnings from a company's earnings

activities are:

1. A Assets

2. B Revenues

3. C Liabilities

4. D Stockholder's equity

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 Full disclosure assumption

The assets of a company total $700,000; the liabilities, $200,000 What are the total claims of the owners?

A company has twice as much owner's equity as it does liabilities.

If total liabilities are $50,000, what amount of assets are owned

5. E Assets cannot be determined from the given information

Which of the following is the correct sequence for the heading for ABC Company’s 2013 balance sheet?

1. A ABC Company, For the year ended 12/31/13, Balance Sheet

2. B For the year ended 12/31/13, Balance Sheet, ABC Company

3. C Balance Sheet, 12/31/13, ABC Company

4. D 12/31/13, ABC Company, Balance Sheet

5. E ABC Company, Balance Sheet, 12/31/13

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 Objectivity principle

5. E Full disclosure principle

Ethical behavior requires:

1. A That an auditor’s 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

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

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

Internal users of accounting information always include:

2. B Monetary unit principle

3. C Revenue recognition principle

4. D Going-concern principle

5. E Cost principle

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

The principle that (A) requires revenue to be recognized at the time it is earned, (B) allows the inflow of assets associated with revenue to be in a form other than cash, and (C) measures the amount of revenue as the cash plus the cash equivalent value of

any noncash assets received from customers in exchange for goods or services is called the:

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

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 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

The difference between a company's assets and its liabilities is:

140 Free Test Bank for Financial Accounting

Information for Decisions 7th Edition by Wild Multiple Choice Questions - Page 2

FastForward had cash inflows from operations of $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000 The net change in cash was:

Canine Grooming record this transaction?

1. A Equipment increases by $600 and Accounts Payable increases by $600

2. B Cash decreases by $600 and Equipment increases by $600

3. C Cash decreases by $600 and Notes Payable decreases by $600.

4. D Equipment increases by $600 and Notes Payable increases by $600

5. E Equipment increases by $600 and Notes Payable decreases by $600

The statement of cash flows reports cash flows for:

$35,000; Notes payable $50,000; Notes receivable $62,000 What were the total assets at year-end?

FastForward 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

2. B 8.5%

5. E 13.0%

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' equity in the amounts of $150,000, $30,000, and

$120,000 respectively What is the total amount of Beta

Corporation's assets after this transaction has been recorded?

1. A Cash decreases by $8,000 and Printing Equipment increases by $8,000

2. B Cash decreases by $8,000 and Accounts Payable increases by $8,000

3. C Cash decreases by $8,000 and Accounts Payable decreases by $8,000

4. D Printing Equipment increases by $8,000 and Accounts Payable

3. C Statement of retained earnings

4. D Statement of cash flows