89 test bank for fundamental financial and managerial accounting concepts 1st

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89 Test Bank for Fundamental Financial and Managerial Accounting Concepts 1st

True - False Questions

Investors in a business usually expect to receive a share of the

income earned by the business in the future

1 True

2 False

The Financial Accounting Standards Board is an agency of the

US government with authority for establishing accounting standards for businesses in the US

1 True

2 False

An asset source transaction increases a business's assets and

the claims to assets.

1 True

2 False

The Sarbanes-Oxley Act of 2002 eased the rules governing

auditors' independence.

1 True

2 False

A business can obtain resources from just two sources: from

owners and from creditors

1 True

2 False

The complete collection of a business's accounts is called the

journal of accounts.

1 True

2 False

The Sarbanes –Oxley Act of 2002 clarified the legal responsibility

of company managers for the entity's financial reports

1 True

2 False

The accounting equation may be written, "Assets = Claims" or

"Assets = Liabilities + Equity."

1 True

2 False

Issuance of common stock is an asset use transaction

1 True

2 False

A business and the person who owns the business are separate

reporting entities.

1 True

2 False

A merchandising company earns revenue primarily by selling

goods to its customers

1 True

2 False

Both liabilities and equity are sources of a business's assets

1 True

2 False

The value created by a business may be called income or

earnings

1 True

2 False

Financial resources are provided to businesses by investors and

consumers

1 True

2 False

The historical cost concept requires that most assets be

reported at the amount paid for them

1 True

2 False

A business's equity is the future obligations of the entity

1 True

2 False

The accounting term, "reliability" refers to information that is

consistent from one accounting period to the next

1 True

2 False

Financial accounting information is usually more detailed than

managerial accounting information

1 True

2 False

All major professional accounting organizations have adopted

formal codes of professional ethics

1 True

2 False

The income statement matches expenses and revenues

1 True

2 False

The types of resources needed by a business are financial,

physical, and capital resources

1 True

2 False

A business's internal controls are policies and procedures

designed to reduce opportunities for fraud

1 True

2 False

The four financial statements prepared by a business bear no

relationship to each other

1 True

2 False

Accounts are subclassifications of the various elements of the

financial statements.

1 True

2 False

In a market, a company that manufactures cars would be referred

to as a conversion agent

1 True

2 False

A business's creditors have a priority claim to its assets in the

event of liquidation

1 True

2 False

Resource providers use accounting information to identify the

businesses they wish to provide resources to

1 True

2 False

The balance sheet reports a business's assets and the claims on

those assets

1 True

2 False

Accounting is sometimes described as an information system or

as the language of business

1 True

2 False

In a market, consumers are resource providers

1 True

2 False

An asset exchange transaction does not affect the total amount

of assets of an entity

1 True

2 False

Dividends that a company pays to its stockholders are treated as

an expense of the business

1 True

2 False

Companies are required to comply with GAAP when preparing

financial information for their managers' use

1 True

2 False

Multple Choice Questions - Page 1

Generally accepted accounting principles (GAAP) are

measurement rules for

1 A managerial accounting.

2 B tax accounting.

3 C financial accounting.

4 D measuring the cost of goods or services provided to customers.

During 2007, Cruz Company earned $5,000 in cash revenue,

incurred $3,700 in cash expenses, and paid $500 in cash dividends to its owners Based on this information,

1 A retained earnings increased by $800 during the year.

2 B net income was $800 for 2007.

3 C the net cash flow from operating activities was $800 for the year.

4 D total assets increased by $1,300 during 2007.

Which of the following groups has primary responsibility for

establishing generally accepted accounting principles for businesses in the United States?

1 A the US Congress

2 B the Securities and Exchange Commission

3 C the Financial Accounting Standards Board

4 D the Internal Revenue Service

Open markets are created by and made up of

1 A resource owners.

2 B conversion agents.

3 C consumers.

4 D all of the above.

Which is the only financial statement for which FASB required a

specific title?

1 A balance sheet

2 B income statement

3 C statement of cash flows

4 D statement of changes in stockholders' equity

A business's equity comes from

1 A its creditors.

2 B investments by owners.

3 C amounts earned by the business.

4 D both B and C

Which financial statement reports the results of a business's

operations?

1 A income statement

2 B statement of changes in equity

3 C balance sheet

4 D statement of cash flows

Conversion agents acquire financial resources from

1 A consumers.

2 B investors.

3 C creditors.

4 D both B and C.

The broad categories of information reported on a business's

financial statements are referred to as

1 A accounts.

2 B elements of the financial statements.

3 C components.

4 D assets.

The balance sheet for Moore Company shows total assets of

$4,000, liabilities of $1,500, and retained earnings of $800 Based on this information, the amount of common stock must be

1 A $700.

2 B $5,500.

3 C $4,700.

4 D $1,700.

A stockholder in a corporation would use _ to learn about the

company

1 A financial accounting information

2 B managerial accounting information

3 C not-for-profit accounting information

4 D both A and C

In a market, _ are resource users

1 A businesses

2 B consumers

3 C financial institutions

4 D governments

Shale Corporation acquired cash by issuing common stock for

$50,000 As a result of this event,

1 A retained earnings increased.

2 B assets increased.

3 C liabilities increased.

4 D both B and C.

In event of liquidation of a business,

1 A creditors have priority claim on the business's assets.

2 B investors have priority claim on the business's assets.

3 C resource users have priority claim on the business's assets.

4 D stakeholders are assured of receiving the resources they had provided to the business.

An investor provides resources to a business in exchange for

1 A physical resources.

2 B priority of claims in event of liquidation.

3 C an ownership interest in the business.

4 D a promise that the resources will be repaid at a given date.

A business's resources are called

1 A assets.

2 B liabilities.

3 C equity.

4 D revenue.

Accounting information focused on the needs of external users

is

1 A financial accounting.

2 B managerial accounting.

3 C claims accounting.

4 D not-for-profit accounting.

The accounting equation may be written,

1 A Revenues – Expenses = Net Income.

2 B Assets = Liabilities.

3 C Liabilities = Equity.

4 D Assets = Claims.

As of December 31, 2007, Bueno Company had $2,000 in

liabilities, $8,000 in common stock, and $2,500 in retained earnings The total amount of assets on that date is

1 A $10,000.

2 B $12,500.

3 C $3,500.

4 D $7,500.

The claims side of the accounting equation

1 A lists the resources that a business owns or controls.

2 B is a listing of the sources of the business's assets.

3 C must balance out to zero.

4 D indicates the amount of profit that a business has earned.

Which financial statement is sometimes called the statement of

financial position?

1 A income statement

2 B statement of changes in equity

3 C balance sheet

4 D statement of cash flows

Resources that a business uses to produce earnings are called

1 A assets.

2 B equity.

3 C revenues.

4 D liabilities.

Liabilities are

1 A claims of creditors.

2 B the owner's interest in the company.

3 C claims of investors.

4 D both A and B.

In a market, _ are conversion agents

1 A businesses

2 B consumers

3 C financial institutions

4 D governments

A creditor

1 A provides financial resources to a business in exchange for an ownership interest.

2 B provides labor resources to a business.

3 C provides financial resources to a business on a lending basis.

4 D is a resource user.

56 Free Test Bank for Fundamental Financial and

Managerial Accounting Concepts 1st Edition By

Edmonds Multple Choice Questions - Page 2

Which of the following transactions is an asset use transaction?

1 A payment of cash dividends to owners

2 B paying cash to acquire furniture

3 C acquiring cash by issuing stock to owners

4 D providing services to customers for cash

The term "articulation"

1 A indicates that there are interrelationships among the financial statements.

2 B requires that asset decreases (expenses) be matched with asset increases

(revenues).

3 C refers to the requirement that separate financial statements be prepared for separate entities.

4 D means that a business's financial statements are prepared for specified periods of time.

If a company's expenses are greater than its revenues for the

year,

1 A its assets increased during the period.

2 B the company incurred a net loss during the period.

3 C the company's liabilities must have increased.

4 D the company's stockholders' equity must have decreased during the period.

Which of the following is NOT an asset use transaction?

1 A paying cash dividends

2 B purchasing land

3 C paying off the principal on a loan

4 D paying salaries to employees

A company's retained earnings at the beginning and ending of

the accounting period were $48,000 and $55,000,

respectively If the company had revenues of $61,000 and expenses of $52,000, the amount of cash dividends paid must have been

1 A $2,000.

2 B $9,000.

3 C $3,000.D $4,000.

Beatrice Company earned $4,000 in cash revenues, paid cash

expenses of $3,450, and paid a cash dividend of $300 to its owners It engaged in no other transactions during the period Which of the following statements is true?

1 A The cash flow from financing activities was $0.

2 B The net cash flow from operating activities was an inflow or increase of $550.

3 C The net cash flow from operating activities was an inflow or increase of $250.

4 D The cash flow from investing activities was an increase of $250.

An asset decrease resulting from consumption of resources to

earn revenue is

1 A a net loss.

2 B a liability.

3 C an expense.

4 D an asset source transaction.

Which of the following items would be an example of revenue?

1 A cash investments made by owners

2 B cash received from a bank loan

3 C cash received from customers for services provided

4 D all of the above

Dayton Company provided services to a customer for $700 cash

As a result of this event,

1 A total assets decreased.

2 B total liabilities increased.

3 C retained earnings increased.

4 D cash flows from financing activities increased.

In 1998, Parker Corporation purchased land for $85,000 In 2007,

Parker Company had the land appraised, and its value was estimated to be $190,000 Also during 2007, another

company offered Parker $145,000 for the parcel of land When the balance sheet is prepared at the end of 2007, at what dollar amount should the land be reported?

1 A $190,000

2 B $85,000

3 C $145,000

4 D none of the above

An asset use transaction

1 A increases one asset and decreases another.

2 B decreases an asset and decreases a liability or equity.

3 C increases an asset and decreases a liability or equity.

4 D increases an asset and increases a liability or equity.

Hamilton Company began operations in 2007 During the year,

the following cash transactions occurred: (1.) issued stock for $40,000; (2.) borrowed $20,000 from bank; (3.) provided services to customers for $53,000 cash; (4.) paid back

$8,000 of the loan from the bank; (5.) paid rent expense,

$9,000; (6.) purchased equipment costing $15,000; (7.) paid operating expenses, $25,000; (8.) paid $4,000 dividend to stockholders What was the cash flow from operating

activities?

1 A an inflow of $4,000

2 B an inflow of $19,000

3 C an inflow of $11,000

4 D an inflow of $15,000

Expenses are shown on the

1 A income statement.

2 B statement of changes in stockholders' equity.

3 C balance sheet.

4 D all of the above.

Grace Company purchased equipment for $45,000 As a result of

this event, Grace had a

1 A $45,000 cash outflow from financing activities.

2 B $45,000 cash inflow from financing activities.

3 C $45,000 cash outflow from investing activities.

4 D $45,000 cash outflow from operating activities.

Hamilton Company began operations in 2007 During the year,

the following cash transactions occurred: (1.) issued stock for $40,000; (2.) borrowed $20,000 from bank; (3.) provided services to customers for $53,000 cash; (4.) paid back

$8,000 of the loan from the bank; (5.) paid rent expense,

$9,000; (6.) purchased equipment costing $15,000; (7.) paid operating expenses, $25,000; (8.) paid $4,000 dividend to stockholders What was the cash flow from financing

activities?

1 A an inflow of $60,000

2 B an inflow of $52,000

3 C an inflow of $36,000

4 D an inflow of $48,000

An asset source transaction

1 A increases one asset and decreases another.

2 B increases an asset and increases a liability or equity.

3 C increases an asset and decreases a liability or equity.

4 D decreases an asset and increases a liability.

Dividends paid by a company are shown on the

1 A income statement.

2 B balance sheet.

3 C statement of changes in stockholders' equity.

4 D all of the above.

Chen Company paid $3,000 cash for utility expenses What kind

of transaction is this?

1 A asset source transaction

2 B asset use transaction

3 C asset exchange transaction

4 D claims source transaction

Paradox Company earned $45,000 of cash revenue What kind of

transaction is this?

1 A asset source transaction

2 B asset use transaction

3 C asset exchange transaction

4 D claims source transaction

Which of the following transactions is an asset source

transaction?

1 A acquired office supplies by signing a short-term note payable

2 B paid cash to purchase land

3 C paid cash for operating expenses

4 D paid cash dividends to owners

Which of the following financial statements provides information

at a specific point in time?

1 A income statement

2 B statement of changes in stockholders' equity

3 C statement of cash flows

4 D balance sheet

Liabilities are shown on the

1 A income statement.

2 B statement of changes in stockholders' equity.

3 C statement of cash flows.

4 D balance sheet.