119 test bank for introduction to financial accounting 11th edition

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119 Test Bank for Introduction to Financial Accounting 11th Edition

Multiple Choice Questions - Page 1

Iacofano Pizza Place acquired equipment costing $11,000 on account The effect of this transaction on Iacofano Pizza Place would be to

1 A) increase equipment by $11,000 and decrease capital by $11,000

2 B) increase equipment by $11,000 and increase capital by $11,000

3 C) increase equipment by $11,000 and increase accounts payable by $11,000

4 D) increase equipment by $11,000 and decrease accounts payable by $11,000

5 E) No transaction is recorded since no cash has been paid

Income taxes owed to the federal government would be classified as a(n)

1 A) liability on the balance sheet

2 B) asset on the balance sheet

3 C) liability on the statement of cash flows

4 D) equity on the balance sheet

5 E) They would not appear on a financial statement

Surround Sound, LLC owned land originally costing $33,000 A real estate agent appraised the land and stated that it is now worth $38,000 Surround Sound, LLC should

1 A) increase the land account by $5,000 and increase the capital stock account by

$5,000

2 B) increase the land account by $5,000 and increase the cash account by $5,000

3 C) increase the land account by $5,000 and increase the paid-in capital in excess of par account by $5,000

4 D) There is no effect from the increase in the value of the land on the accounts of Surround Sound, LLC

5 E) increase the land account and the investment account

What effect does the purchase of store equipment on account have on the balance sheet equation?

1 A) Assets increase and liabilities decrease

2 B) Assets increase and liabilities increase

3 C) Assets decrease and liabilities decrease

4 D) Assets decrease and liabilities increase

5 E) There is no effect on the accounting equation

Mexland Company, acquired land costing $25,000 Mexland Company paid

$10,000 in cash and issued a short-term note for the balance The effect of this transaction on Mexland Company, would be to

1 A) increase the land account by $25,000, decrease the cash account by $10,000, and decrease the balance in the notes payable account by $15,000

2 B) increase the land account by $25,000, decrease the cash account by $10,000, and decrease the balance in the notes receivable account by $15,000.

3 C) increase the land account by $25,000, decrease the cash account by $10,000, and increase the balance in the notes receivable account by $15,000

4 D) increase the land account by $10,000 and decrease the cash account by $10,000

5 E) increase the land account by $25,000, decrease the cash account by $10,000, and increase the balance in the notes payable account by $15,000

Payton Corporation, acquired some office equipment, including a desk costing

$900 The owner of the business next door said that he had been searching for

a desk just like that one, so Payton Corporation, sold the desk to its business neighbor at cost, receiving $400 in cash, with the remainder to be paid in 30 days The effect of this transaction on Payton Corporation, would be to

1 A) increase the cash account by $400, increase the capital account by $500, and

decrease the equipment account by $900

2 B) increase the cash account by $400, increase the accounts payable account by $500, and decrease the equipment account by $900

3 C) increase the cash account by $400, decrease the accounts payable account by $500,and decrease the equipment account by $900

4 D) increase the cash account by $400, increase the accounts receivable account by

$500, and decrease the equipment account by $900

5 E) increase the cash account by $400, decrease the accounts receivable account by

$500, and decrease the equipment account by $900

The accounting equation can be stated as which of the following?

1 A) Assets - liabilities = owners' equity

2 B) Assets + liabilities = owners' equity

3 C) Liabilities + assets = owners' equity

4 D) Owners' equity + assets = liabilities

5 E) Liabilities - owners' equity = assets

What accounts are affected by an initial investment of cash by an owner into his business?

1 A) Cash and Owner payable

2 B) Cash and Long-term debt payable

3 C) Owner payable and Accounts payable

4 D) Cash and Capital

5 E) Cash and Retained earnings

Sounds Good Entertainment acquired office equipment valued at $4,000 and office supplies valued at $600 by paying cash of $1,300 with the balance on account The effect of this transaction on Sounds Good Entertainment would

be to

1 A) increase the cash account by $1,300, increase the accounts payable account by

$3,300, and increase the office equipment account by $4,600

2 B) increase the office equipment account by $4,600, decrease the cash account by

$1,300, and decrease the accounts payable account by $3,300

3 C) decrease the cash account by $1,300, increase the accounts payable account by

$3,300, increase the office equipment account by $4,000, and increase the office supplies

by $600

4 D) increase the cash account by $1,300, increase the capital account by $3,300,

decrease the equipment account by $4,000, and increase the office supplies account by

$600

5 E) increase the office supplies account by $600, decrease the office equipment account

by $4,000, increase the accounts payable account by $4,000, and decrease the cash account by $600

Which of the following statements is false?

1 A) If you increase an asset account, you may increase a liability account

2 B) If you increase an asset account, you may decrease an asset account

3 C) If you decrease an asset account, you may increase an owners' equity account

4 D) If you decrease an asset account, you may decrease an owners' equity account

5 E) If you increase an asset account, you may increase an owners' equity account

The accountant at Forgum Corporation is asked to prepare the financial

statements for the month of July Which financial statement will he NOT

prepare?

1 A) Balance sheet

2 B) Income statement

3 C) Statement of earnings and taxation

4 D) Statement of cash flows

5 E) Statement of stockholders' equity

A liability that results from a purchase of goods or services on open account is referred to as a(n)

months The effect on Smith's Medical Supplies is to

1 A) decrease the land account by $15,000, increase the cash account by $6,000, and increase the balance in the notes payable account by $9,000

2 B) decrease the land account by $15,000, increase the cash account by $6,000, and increase the balance in the notes receivable account by $9,000

3 C) decrease the land account by $15,000, increase the cash account by $6,000, and decrease the balance in the notes receivable by $9,000

4 D) decrease the land account by $6,000 and increase the cash account by $6,000

5 E) decrease the land account by $15,000, increase the cash account by $6,000, and decrease the balance in the notes payable account by $9,000

The governmental agency that regulates the stock market and the financial reporting of firms that trade in the market is the

1 A) Financial Accounting Standards Board

2 B) Internal Revenue Service.

3 C) Public Company Accounting Oversight Board

4 D) Securities and Exchange Commission

5 E) Generally Accepted Accounting Board

A transaction

1 A) affects the financial position of an entity

2 B) maintains the equality of the balance sheet equation

3 C) affects the cash position of an entity

4 D) will always change values on the income statement

3 C) owner investments.

4 D) liabilities

5 E) expenses

Annual reports include all, but which of the following?

1 A) A letter from corporate management

2 B) Footnotes that explain many elements of the financial statements in more detail

3 C) The report of the independent registered public accounting firm (auditors)

4 D) Statements by both management and auditors on the company's internal controls

5 E) The company's handbook for new employees

Home Theater Advantage sells audio equipment Home Theater Advantage acquired 50 speakers from a manufacturer at a cost of $200 per speaker and purchased the speakers on account The effect of this transaction on Home Theater Advantage would be to

1 A) increase inventory by $10,000 and increase capital by $10,000

2 B) increase inventory by $10,000 and decrease capital by $10,000

3 C) increase inventory by $10,000 and decrease cash by $10,000

4 D) increase inventory by $10,000 and increase accounts payable by $10,000

5 E) increase inventory by $10,000 and decrease accounts payable by $10,000

The primary purpose of financial accounting is to

1 A) supply information for external users' decision making

2 B) provide data for internal users' decision making.

3 C) produce data for income taxes

4 D) create an audit report

5 E) organize the data for management

Manziel Inc is a sole proprietorship owned by Chris Herold Chris acquired

$9,000 worth of equipment for use in his store He will pay for the equipment in

30 days The effect of this transaction on Manziel would be to

1 A) increase the equipment account by $9,000 and increase the accounts payable account by $9,000

2 B) increase the equipment account by $9,000 and decrease the accounts payable account by $9,000

3 C) increase the equipment account by $9,000 and increase the capital account by

$9,000

4 D) This would not change any account because the equipment has not been paid for

5 E) This would not change any account because this transaction does not affect Manziel Inc

Mailers Manufacturing, acquired equipment for $19,000 Mailers Manufacturing, paid $6,000 in cash, with the balance due on a note The effect of this

transaction on Mailers Manufacturing, would be to

1 A) increase the equipment account by $19,000, decrease the cash account by $6,000 and increase the notes payable account by $13,000

2 B) increase the equipment account by $19,000, decrease the cash account by $6,000, and decrease the notes receivable by $13,000

3 C) increase the equipment account by $6,000, and decrease the cash account by

Which of the following statements is true?

1 A) Owners' equities are economic sacrifices after deducting liabilities

2 B) Assets are expected to benefit no one

3 C) Liabilities are future cash inflows

4 D) Assets are always the sum of liabilities and owners' equities

5 E) Owners' equities have priority over liabilities for assets upon liquidation

Assets amount to $35,000 at the beginning of the period and $40,000 at the end

of the period Liabilities amount to $10,000 at the beginning of the period and

$20,000 at the end of the period What is the amount of the change and the direction of the change in owners' equity for the period?

Stockholders' equity at the beginning and end of the period amounts to $16,000 and $19,000, respectively Assets at the beginning and end of the period

amount to $26,000 and $21,000, respectively Liabilities at the beginning of the period were $10,000 Liabilities at the end of the period amount to

Zeus Greek Foods purchased a $21,000 van for use in the business The

company made a $15,000 cash down payment, and signed a note for the

balance The effect of this transaction on Zeus Greek Foods would be to

1 A) increase the van account by $21,000, decrease the cash account by $15,000, and decrease the notes receivable account by $6,000

2 B) increase the van account by $21,000, decrease the cash account by $15,000, and decrease the notes payable account by $6,000

3 C) increase the van account by $15,000 and decrease the cash account by $15,000

4 D) increase the van account by $21,000, decrease the cash account by $15,000, and increase the notes payable account by $6,000

5 E) decrease the van account by $15,000 and increase the cash account by $15,000

An entity

1 A) is a separate economic unit

2 B) allows a section of an organization to be a separate economic unit.

3 C) helps accountants relate events to a defined area of accounting

4 D) All of the above

5 E) None of the above

Jakey Technologies has 1,000 folders in inventory that cost $2.00 each The company's supplier announced that, effective immediately, all future folders will cost $2.20 each Jakey Technologies should

1 A) increase the inventory account by $200 and increase the capital account by $200

2 B) increase the inventory account by $200 and decrease the capital account by $200

3 C) increase the inventory account by $200 and increase the accounts payable account

1 A) included in the audit report

2 B) an integral part of financial statement information

3 C) an appendix to the letter from corporate management

4 D) at the bottom of the report of the independent auditors

5 E) explanatory information in the statement of management's responsibility for

preparation of financial statements

Which of the following individuals are most interested in management

accounting information for Dotty Industries?

1 A) Bankers who loan money to Dotty Industries

2 B) The IRS, who Dotty Industries pays taxes to

3 C) Stockholders who buy stock in Dotty Industries

4 D) Management who work for Dotty Industries

5 E) Suppliers who sell goods to Dotty Industries

Kitty Clips acquired $2,800 worth of merchandise inventory on account Upon inspection, the company discovered that $400 worth of the merchandise

inventory was defective Kitty Clips returned the defective merchandise

inventory and received full credit The effect of the return transaction on Kitty Clips would be to

1 A) decrease the merchandise inventory account by $400 and increase the accounts payable account by $400

2 B) decrease the merchandise inventory account by $400 and decrease the accounts payable account by $400

3 C) decrease the merchandise inventory account by $400 and increase the accounts receivable account by $400

4 D) decrease the merchandise inventory account by $400 and decrease the accounts receivable account by $400

5 E) Because the merchandise inventory was never used, Kitty Clips would not record the return of the merchandise inventory

Which of the following would be classified as external users of financial

statements?

1 A) Creditors of the organization and the Internal Revenue Service

2 B) Stockholders and the CFO of the organization

3 C) Management of the organization and the audit firm

4 D) Management of the organization and SEC

5 E) Stockholders and middle managers of the organization

If liabilities increase by $10,000 during a given period and stockholders' equity decreases by $6,000 during the same period, assets must have

1 A) increased by $16,000

2 B) increased by $4,000

3 C) decreased by $4,000

4 D) decreased by $16,000

5 E) This cannot be determined with the given information

An example of stockholders' equity is

Which of the following describes a liability?

1 A) Future economic benefit

2 B) Economic obligations to creditors

3 C) Paid-in capital

4 D) Investment by owners

5 E) Present value of customer future payments

69 Free Test Bank for Introduction to Financial Accounting 11th Edition by Horngren Multiple Choice Questions -

Page 2

An auditor's opinion is not

1 A) a report describing the auditor's examination of transactions and financial statements

2 B) included in the financial statements in the annual report issued by the corporation

3 C) another name for independent opinion

4 D) certified by the Securities Exchange Commission

5 E) a third party review

Generally accepted accounting principles

1 A) are advisory guidelines for management

2 B) are only applicable to balance sheets

3 C) are to be followed in the preparation of financial statements

4 D) can never be deviated from

5 E) are uniform world-wide.

The regulatory body overseeing disclosures for governmental organizations is

1 A) Government Accounting Standards Board

2 B) Government Accounting Standards Commission

3 C) Governmental Financial Reporting Board

4 D) Governmental Financial Reporting Commission

5 E) Governmental Taxation Standards Board

Which is a disadvantage of a corporation?

1 A) Limited liability for owners

2 B) Easy transfer of ownership

3 C) Ease in raising ownership capital from potential stockholders

4 D) Management's consumption of perquisites

5 E) Continuity of existence

Which of the following international public accounting firms is not considered one of the four largest?

1 A) Deloitte Touche Tohmatsu

2 B) Ernst & Young

3 C) KPMG

4 D) PwC

5 E) Grant Thornton

Passport Global sold 250 shares of $4.00 par value capital stock in exchange for equipment worth $3,000 The effect of this transaction on Passport Global would be to

1 A) increase the equipment account by $1,000 and increase the capital at par by $1,000

2 B) increase the equipment account by $3,000 and increase the capital at par by $3,000

3 C) increase the equipment account by $3,000, increase the capital stock at par by

$1,000, and increase the paid-in capital in excess of par account by $2,000

4 D) increase the equipment account by $3,000 and decrease the capital stock at par by

$3,000

5 E) increase the equipment account by $3,000, decrease the capital stock at par by

$1,000, and decrease the paid-in capital in excess of par account by $2,000

Michael Hudson owns 400 shares of Surefoot Enterprises The capital stock of Surefoot Enterprises has a par value of $8 per share Michael Hudson sells his

400 shares of Surefoot Enterprises stock to Brian Haas for $15 per share The effect of this transaction on Surefoot Enterprises, would be to

1 A) increase the cash account by $6,000 and increase the capital stock account by

5 E) Surefoot Enterprises records this transaction but would not note the change in ownership.

The Financial Accounting Standards Codification

1 A) classifies U.S GAAP to make it easy to research financial reporting issues

2 B) classifies U.S tax laws to make it easy to research U.S tax laws

3 C) classifies International Financial Reporting Standards to make it easy to research reporting issues

4 D) classifies international tax laws to make it easy to research international tax laws

5 E) classifies financial statements by type of organization and structure

The auditor's opinion includes all except which of the following statements?

1 A) The financial statements are in conformity with generally accepted accounting principles

2 B) The financial statements are the responsibility of the company's management

3 C) The audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements

4 D) The auditor's responsibility is to express an opinion on the financial statements

5 E) The financial statements are free of any and all misstatements

Public accountants follow the code of ethics for professional conduct

established by the

1 A) Sarbanes-Oxley Act

2 B) Securities and Exchange Commission

3 C) Financial Accounting Standards Board.

4 D) Congress of the United States

5 E) American Institute of Certified Public Accountants

The accuracy and truthfulness of the financial statements is the responsibility

5 E) external auditors and the staff accountants

To ensure proper application of a CPA's technical knowledge, the Public Company Accounting Oversight Board issues:

1 A) Generally Accepted Accounting Principles

2 B) Statements of Financial Accounting Standards

3 C) Accounting Standards Updates

4 D) Generally Accepted Auditing Standards

5 E) Sarbanes-Oxley Acts for Accounting

When stock is sold, the difference between the total amount the company receives and the par value is called

1 A) stated value

2 B) par value.

3 C) additional paid-in capital

4 D) stockholders' equity value

5 E) common stock

Public accounting is

1 A) the field of accounting where accountants work for businesses, government agencies,

or other nonprofit organizations

2 B) the field of accounting where services are offered to the general public on a fee basis

3 C) a field of accounting where no audits occur

4 D) the field that provides management with internal company reports

5 E) unregulated

Postal Manufacturing began business on July 1, 20X5, by selling 1,000 shares

of $10 par value capital stock at $30 per share The effect of this transaction on Postal Manufacturing would be to

1 A) increase the capital stock at par by $10,000, increase the paid-in capital in excess of par account by $20,000, and increase the cash account by $30,000

2 B) decrease the capital stock at par by $30,000 and increase the cash account by

$30,000

3 C) increase the capital stock at par by $30,000 and increase the cash account by

$30,000

4 D) decrease the capital stock at par by $10,000, decrease the paid-in capital in excess

of par account by $20,000, and increase the cash account by $30,000