153 test bank for accounting principles 6th canadian edition

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153 Test Bank for Accounting Principles 6th Canadian Edition

True - False Questions

Accounting is the information system that identifies, records, and

communicates the economic events of an organization to a wide variety of interested users

Publicly Traded Corporations can choose to report under either ASPE or IFRS

The going concern assumption is the assumption that a company will

continue to operate in the foreseeable future

1 True

2 False

An obligation to pay cash to a supplier in the future is called accounts

In a proprietorship, there may be 2 or more owners

1 True

2 False

A balance sheet presents the revenues and expenses, and the resulting profit

or loss for a specific period of time

A balance sheet reports the assets, liabilities, and owner’s equity at a specific date

Assets are current obligations, arising from past events, to make a future payment or to provide services

Only the accountants should be concerned with ethics when the financial statements are being prepared

Ethics are critical in the preparation of accounting information

The cost and fair value of an asset are the same at the time of acquisition and

in all subsequent periods

Multiple Choice Questions - Page 1

Generally accepted accounting principles are

1 a income tax regulations.

2 b standards that indicate how to report economic events.

3 c theories that are based on physical laws of the universe.

4 d principles that have been proven correct by academic researchers.

The main objective of the financial statements is

1 a to show the profit of a company.

2 b to allow customers to determine whether a company will honour its product warranties.

3 c to provide useful information to investors and creditors to make decisions about a business.

4 d to determine how many employees the company can afford to hire each year.

The going concern assumption

1 a states that a company will not operate long enough to utilize assets and fulfill obligations.

2 b assumes the company will continue to operate in the foreseeable future.

3 c is inconsistent with the cost principle.

4 d states that net worth is the most appropriate value at which to record assets.

The partnership form of business organization

1 a is a separate legal entity.

2 b is a common form of organization for service-type businesses.

3 c enjoys an unlimited life.

4 d has limited liability.

When an owner, in a proprietorship or partnership, withdraws cash or other assets from a business for personal use, these withdrawals are termed

1 a expenses.

2 b salary.

3 c drawings.

4 d a credit line.

The International Accounting Standards Board

1 a works to reduce differences in accounting practices across countries.

2 b promotes unique accounting applications.

3 c works to increase differences in accounting practices across countries.

4 d only operates in countries which speak English.

Evan Guanzon owns and operates Guanzon’s Pizza Express Evan should record the cost of wages paid to store employees as a (an)

1 a revenue.

2 b expense.

3 c liability.

4 d asset.

An external user would NOT include

1 a A creditor of the company.

2 b Canada Revenue Agency.

3 c An employee.

4 d The company’s bank.

The common characteristic possessed by all assets is

1 a long life.

2 b great monetary value.

3 c tangible nature.

4 d future economic benefit.

Which of the following is true when considering the accounting equation?

1 a An increase in an asset must always equal a decrease in a liability.

2 b For every transaction an asset and a liability must be affected.

3 c An increase in a liability must equal a decrease in owner’s equity.

4 d An increase in an asset may result in a decrease in another asset.

Mel Green is the proprietor (owner) of Green's, a retailer of athletic apparel When recording the financial transactions of Green's, Mel does not record an entry for a car he purchased for personal use Mel took out a personal loan to pay for the car What accounting assumption guides Mel's behaviour in this situation?

1 a going concern assumption

2 b economic entity concept

3 c time period assumption

4 d monetary unit assumption

Which of the following is NOT an advantage of the corporate form of business organization?

1 a limited liability of shareholders

3 c Statement of Owner’s Equity

4 d Cash Flow Statement

An external user could be

1 a employees.

2 b management.

3 c Canada Revenue Agency.

4 d the human resource director.

Judy and Marilyn met at law school and decide to start a small law practice after graduation They agree to split revenues and expenses evenly The most common form of business organization for a business such as this would be a(n)

1 a non profit organization.

2 b partnership.

3 c corporation.

4 d proprietorship.

A business organized as a corporation

1 a is not a separate legal entity in most provinces.

2 b requires that shareholders be personally liable for the debts of the business.

3 c is owned by its shareholders.

4 d terminates when one of its original shareholders dies.

The basic accounting equation, in a proprietorship, CANNOT be restated as

1 a Assets – Liabilities = Owner's Equity.

2 b Assets – Owner's Equity = Liabilities.

3 c Owner's Equity + Liabilities = Assets.

4 d Assets + Liabilities = Owner's Equity.

All of the following are steps used to analyze ethical dilemmas EXCEPT

1 a using the organization’s code of ethics to identify ethical situations.

2 b using personal ethics to identify ethical situations.

3 c identifying potential stakeholders.

4 d discussing the ethical dilemma with co-workers.

Revenues would NOT result from

1 a sale of merchandise.

2 b initial investment of cash by owner.

3 c performance of services.

4 d rental of property to a tenant.

Emily Hogan recently opened a new business The business has been very successful and as a reward for all her hard work Emily spent a day at the local spa Emily paid for the spa using a company credit card and charged the amount to the expense account called Repairs and Maintenance expense Emily’s actions violated which of the following?

1 a The going concern assumption

2 b The monetary unit assumption

3 c The cost principle

4 d The economic entity concept

Owner's equity is often referred to as

1 a residual equity.

2 b leftovers.

3 c spoils.

4 d a second equity.

The accounting equation, for a proprietorship, may be expressed as

1 a Assets = Liabilities + Shareholders' Equity.

2 b Assets – Liabilities = Partners' Equity.

3 c Assets = Liabilities + Owner's Equity.

The accounting equation, for a corporation, is best expressed as

1 a Assets = Liabilities + Shareholders' Equity.

2 b Assets – Liabilities = Partner’s Equity.

3 c Assets = Liabilities + Owner's Equity.

4 d all of these.

Which of the following would violate the economic entity concept?

1 a reporting amounts owed to the company’s suppliers as a liability on the balance sheet.

2 b reporting equipment owned and used in the business as an asset in the balance sheet.

3 c reporting withdrawals by the owner as a drawing in the statement of owner’s equity.

4 d reporting the owner’s personal sailboat as an asset on the balance sheet.

Which of the following principles or assumptions requires that the activities of

a business be kept distinct from those of its owner(s)?

1 a economic entity concept

2 b going concern assumption

3 c monetary unit assumption

In a proprietorship, owner’s equity is affected by all of the following EXCEPT

1 a the investment of cash by the owners.

2 b the purchase of a personal automobile by the owner using personal funds.

3 c the purchase of a computer for the owner’s son using cash generated by the business.

4 d the sale of goods by the business.

ASPE requires less information on the financial statements of private

companies than IFRS requires because

1 a private companies are smaller than public companies.

2 b users of private company financial statements have the ability to obtain additional information from the company if required.

3 c public companies have their information available on the internet.

4 d public companies may report in different foreign currencies.

Sources of increases to owner's equity, in a proprietorship, are

1 a additional investments by owners.

2 b purchases of merchandise.

3 c withdrawals by the owner.

4 d sale of share capital.

Owner's equity, in a proprietorship, is increased by

1 a drawings.

1 a Corporations are the most prevalent form of business organization.

2 b Corporate businesses are generally smaller in size than partnerships and ships.

proprietor-3 c The revenues of corporations are greater than the combined revenues of

partnerships and proprietorships.

4 d Corporations are separate legal entities organized exclusively under federal law.

Canadian Accounting Standards allow a choice of whether or not to use

International Financial Reporting Standards for which type of company?

1 a Public companies

2 b Only small private companies

3 c Banks

4 d All private companies in Canada

The proprietorship form of business organization

1 a must have at least three owners in most provinces.

2 b represents the largest number of businesses in Canada.

3 c combines the records of the business with the personal records of the owner.

4 d is characterized by a legal distinction between the business as an economic unit and the owner.

GAAP stands for

1 a Generally Accepted Auditing Procedures.

2 b Generally Accepted Accounting Principles.

3 c Generally Accepted Auditing Principles.

4 d Generally Accepted Accounting Procedures.

Liabilities

1 a are future economic benefits.

2 b are current or long term obligations arising from past events.

3 c possess service potential.

4 d are things of value used by the business in its operation.

Which of the following would NOT be considered an internal user of accounting data for the ABC Company?

1 a President of the company

2 b Production manager

3 c Merchandise inventory clerk

4 d President of the employees' labour union

104 Free Test Bank for Accounting Principles 6th Canadian Edition by Weygandt Multiple Choice Questions - Page 2

Shareholders' equity, in a corporation, is increased by

1 a an expense.

2 b shareholder purchase of common shares.

3 c payment of dividends.

4 d liabilities.

The income statement is prepared from the data in the

1 a assets column.

2 b liabilities column.

3 c owner’s equity column.

4 d liabilities and owner’s equity column.

If expenses, in a proprietorship, are paid in cash, then

1 a assets will increase.

2 b liabilities will decrease.

3 c owner's equity will increase.

4 d assets will decrease.

A balance sheet, in a proprietorship, shows

1 a revenues, liabilities, and owner's equity.

2 b expenses, drawings, and owner's equity.

3 c revenues, expenses, and drawings.

4 d assets, liabilities, and owner's equity.

An Income Statement

1 a summarizes the changes in owner's equity for a specific period of time.

2 b reports the changes in assets, liabilities, and owner's equity over a period of time.

3 c reports the assets, liabilities, and owner's equity at a specific date.

4 d presents the revenues and expenses for a specific period of time.

Payment of a liability for an expense that has been previously recorded

1 a does not affect the owner’s equity account.

2 b only affects the liability accounts.

3 c does not affect the asset accounts.

4 d only affects the asset accounts.

If an individual asset, in a proprietorship, is increased, then

1 a there may be an equal decrease in a specific liability.

2 b there may be an equal decrease in owner's equity.

3 c there may be an equal decrease in another asset.

4 d none of these is possible.

The cost principle requires that when assets are acquired, they be recorded at

1 a appraisal value.

2 b the amount paid.

3 c the amount the asset could be sold for.

4 d list price.

Which of the following statements is correct in regards to the order of

preparing financial statements?

1 a Income statement, Balance sheet, Statement of changes in owner’s equity, Cash flow statement

2 b Balance sheet, Income statement, Cash flow statement, Statement of changes in owner’s equity

3 c Income statement, Statement of changes in owner’s equity, Balance sheet, Cash flow statement

4 d Income statement, Statement of changes in owner’s equity, Cash flow statement, Balance sheet

If total liabilities increased by $5,000, then

1 a assets must have decreased by $5,000.

2 b owner's equity must have increased by $5,000.

3 c assets must have increased by $5,000, or owner's equity must have decreased by

$5,000.

4 d assets and owner's equity each increased by $2,500.

The cost of advertising purchased for the month is considered an expense, not an asset because

1 a the expense will generate future benefits.

2 b the advertising will generate future cash inflows.

3 c the benefits of the expense have already been used.

4 d the expense has not yet been used.

Which of the following transactions would NOT affect Cash?

1 a payment to a supplier on account

2 b purchase of supplies on account

3 c payment of salaries for the week

4 d prepaying an insurance premium

Two or more items could be affected by a transaction Which of the following statements is INCORRECT?

1 a An increase in an asset may result in a decrease in another asset.

2 b An increase in an asset may result in a decrease in an asset and increase in a liability.

3 c An increase in a liability may result in a decrease in an asset.

4 d An increase in a liability may result in a decrease in owner’s equity.

Owner's equity, in a proprietorship, is decreased by

1 a assets.

2 b revenues.

3 c expenses.

4 d liabilities.

Which of the following would NOT affect owner’s equity?

1 a a cash receipt from a customer in payment of account

2 b payment of an expense

3 c services provided for cash

4 d withdrawal of funds for personal use

The primary purpose of the Cash Flow Statement is to report

1 a a company's investing transactions.

2 b a company's financing transactions.

3 c information about cash inflows and cash outflows of a company.

4 d the net increase or decrease in cash.

The Income Statement is sometimes referred to as

1 a a Statement of Earnings.

2 b the Statement of Financial Position.

3 c the Cash Flow Statement.

4 d the Statement of Owner's Equity.

Jackson's Small Engine Repair Shop, a proprietorship, started the year with total assets of $60,000 and total liabilities of $40,000 During the year, the business recorded $100,000 in repair revenues, $55,000 in expenses, and Mike Jackson, the owner, withdrew $10,000 Jackson's Capital balance changed by what amount from the beginning of the year to the end of the year?

1 a $10,000.

2 b $45,000.

3 c $20,000.

4 d $35,000.

If supplies that have been purchased are used in the course of business, then

1 a a liability will increase.