177 test bank for accounting principles 11th edition

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177 Test Bank for Accounting Principles 11th Edition

True False Questions - - Multiple Choice Questions

The Duce Company has five plants nationwide that cost a total of $100 million The current fair value of the plants is $500 million The plants will be recorded and reported as assets at

The use of computers in recording business events

1 c has greatly impacted the identification stage of the accounting process.

2 b does not use the same principles as manual accounting systems.

3 a has made the recording process more efficient.

4 d is economical only for large businesses.

Financial accounting provides economic and financial information for all of the following except

1 c managers.

2 b investors.

3 a creditors.

4 d other external users.

Accountants refer to an economic event as a

1 d change in ownership.

2 a purchase.

3 c transaction.

4 b sale.

The accounting process involves all of the following except

1 a identifying economic transactions that are relevant to the business.

2 b communicating financial information to users by preparing financial reports.

3 d analyzing and interpreting financial reports.

4 c recording nonquantifiable economic events.

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

1 a The appointment of a new CPA firm to perform an audit.

2 d Payment of income taxes.

3 b The purchase of a new computer.

4 c The sale of store equipment.

Communication of economic events is the part of the accounting process that involves

1 d recording and classifying information.

2 b quantifying transactions into dollars and cents.

3 c preparing accounting reports.

4 a identifying economic events.

A small neighborhood barber shop that is operated by its owner would likely

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

1 a Limited liability of stockholders

2 b Transferability of ownership

3 d Unlimited life

4 c Unlimited personal liability for stockholders

Which one of the following is not an external user of accounting information?

1 a Regulatory agencies.

2 d All of these are external users.

3 c Investors.

4 b Customers.

The process of recording transactions has become more efficient because

1 a fewer events can be quantified in financial terms.

2 d business events are recorded only at the end of the year.

3 b computers are used in processing business events.

4 c more people have been hired to record business transactions.

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

1 a Identification.

2 d Analysis.

The accounting process is correctly sequenced as

1 d communication, recording, identification.

2 b recording, communication, identification.

3 c identification, recording, communication.

4 a identification, communication, recording.

A business organized as a corporation

1 d terminates when one of its original stockholders dies.

2 a is not a separate legal entity in most states.

3 c is owned by its stockholders.

4 b requires that stockholders be personally liable for the debts of the business.

A private accountant can perform many activities in a business organization but would not work in

1 d tax accounting.

2 a budgeting.

3 c external auditing.

4 b accounting information systems.

The economic entity assumption requires that the activities

1 c of a sole proprietorship cannot be distinguished from the personal economic events

of its owners.

2 d of an entity be kept separate from the activities of its owner.

3 a of different entities can be combined if all the entities are corporations.

4 b must be reported to the Securities and Exchange Commission.

Which list below best describes the major services performed by public accountants?

1 b Employee training, auditing, bookkeeping.

2 d Cost accounting, production scheduling, recruiting.

3 a Bookkeeping, mergers, budgets.

4 c Auditing, taxation, management consulting.

The first step in solving an ethical dilemma is to

1 a identify and analyze the principal elements in the situation.

2 d weigh the impact of each alternative on various stakeholders.

3 c recognize an ethical situation and the ethical issues involved.

4 b identify the alternatives.

Which of the following techniques are not used by accountants to interpret and report financial information?

1 a Graphs.

2 d Ratios.

3 c Charts.

4 b Special memos for each class of external users.

Generally accepted accounting principles are

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

2 a income tax regulations of the Internal Revenue Service.

3 b standards that indicate how to report economic events.

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

Ethics are the standards of conduct by which one's actions are judged as

1 d the SEC and FASB rarely cooperate in developing accounting standards.

2 a they are both governmental agencies.

3 c the SEC often mandates guidelines when no accounting principles exist.

4 b the SEC is a private organization of accountants.

Which of the following would not be considered internal users of accounting data for a company?

1 d Salesmen of the company.

2 b The controller of a company.

3 c Creditors of a company.

4 a The president of a company.

GAAP stands for

1 b Generally Accepted Accounting Principles.

2 d Generally Accepted Accounting Procedures.

3 c Generally Accepted Auditing Principles.

4 a Generally Accepted Auditing Procedures.

Which of the following would not be considered an internal user of accounting data for the GHI Company?

1 d President of the employees' labor union.

2 a President of the company.

3 b Production manager.

4 c Merchandise inventory clerk.

The partnership form of business organization

1 d has limited liability.

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

3 c enjoys an unlimited life.

4 a is a separate legal entity.

Which of the following would not be considered an external user of accounting data for the GHI Company?

Preparing tax returns and engaging in tax planning is performed by

1 b private accountants only.

2 c both public and private accountants.

3 d IRS accountants only.

4 a public accountants only.

The cost of an asset and its fair value are

1 d the same on the date of acquisition.

2 b the same when the asset is sold.

3 a never the same.

4 c irrelevant when the asset is used by the business in its operations.

The private sector organization involved in developing accounting principles

is the

1 c Financial Accounting Standards Board.

2 a Feasible Accounting Standards Body.

3 d Financial Auditors' Standards Body.

4 b Financial Accounting Studies Board.

The body of theory underlying accounting is not based on

1 b concepts.

2 d definitions.

3 c principles.

4 a physical laws of nature.

The origins of accounting are generally attributed to the work of

1 d Leonardo da Vinci.

2 c Luca Pacioli.

The proprietorship form of business organization

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

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

3 a must have at least three owners in most states.

4 b represents the largest number of businesses in the United States.

The final step in solving an ethical dilemma is to

1 b recognize an ethical situation.

2 a identify and analyze the principal elements in the situation.

3 c identify the alternatives and weigh the impact of each alternative on stakeholders.

4 d recognize the ethical issues involved.

137 Sample Test Bank for Accounting Principles 11th Edition by Weygand Multiple Choice Questions - Page 2

The assumption that the unit of measure remains sufficiently constant over time is part of the

1 d monetary unit assumption.

2 b cost principle.

3 c historical cost principle.

4 a economic entity assumption.

If total liabilities decreased by $15,000 and owner’s equity decreased by

$10,000 during a period of time, then total assets must change by what amount and direction during that same period?

1 d $25,000 increase

2 a $25,000 decrease

3 b $5,000 decrease

4 c $5,000 increase

If services are rendered for credit, then

1 a assets will decrease.

2 d liabilities will decrease.

3 b liabilities will increase.

4 c owner's equity will increase.

If an individual asset is increased, then

1 c there must be an equal decrease in another asset.

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

3 d any of these is possible.

4 a there must be an equal decrease in a specific liability.

If expenses are paid in cash, then

1 c owner's equity will increase.

2 d assets will decrease.

3 b liabilities will decrease.

4 a assets will increase.

Revenues are

1 b gross increases in owner's equity resulting from business activities.

2 d actual or expected cash outflows.

3 c the cost of services used during the period.

4 a the cost of assets consumed during the period.

If total liabilities decreased by $25,000 and owner’s equity increased by

$15,000 during a period of time, then total assets must change by what amount and direction during that same period?

1 c $10,000 increase

2 b $10,000 decrease

3 a $40,000 decrease

4 d $40,000 increase

The basic accounting equation may be expressed as

1 b Assets – Liabilities = Owner's Equity.

2 d all of these.

3 a Assets = Equities.

4 c Assets = Liabilities + Owner's Equity.

The common characteristic possessed by all assets is

1 d future economic benefit.

2 a long life.

3 c tangible nature.

4 b great monetary value.

Owner's equity is decreased by

3 a $120,000 = $60,000 + $60,000

4 c $135,000 = $67,500 + $67,500

A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the

1 c corporate form of ownership.

2 d economic entity assumption.

3 b monetary unit assumption.

4 a stand alone concept.

If total liabilities increased by $8,000, then

1 c assets must have increased by $8,000, or owner's equity must have decreased by

$8,000.

2 b owner's equity must have increased by $8,000.

3 d assets and owner's equity each increased by $4,000.

4 a assets must have decreased by $8,000.

Owner's equity is increased by

1 d liabilities.

2 c expenses.

3 a drawings.

4 b revenues.

Liabilities

1 b are existing debts and obligations.

2 a are future economic benefits.

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

4 c possess service potential.

Revenues would not result from

1 b initial investment of cash by owner.

If an owner makes a withdrawal of cash from a proprietorship, then

1 d there will be a new liability showing the owner owes money to the business.

2 c owner's equity will decrease.

3 b owner's equity will increase.

4 a there has been a violation of accounting principles.

Owner's equity is often referred to as

The basic accounting equation cannot be restated as

1 c Owner's Equity + Liabilities = Assets.

2 b Assets – Owner's Equity = Liabilities.

3 d Assets + Liabilities = Owner's Equity.

4 a Assets – Liabilities = Owner's Equity.

Ted Leo is the proprietor (owner) of Ted's, a retailer of golf apparel When recording the financial transactions of Ted's, Ted does not record an entry for

a car he purchased for personal use Ted took out a personal loan to pay for the car What accounting concept guides Ted's behavior in this situation?

1 c Cash basis concept

2 b Economic entity assumption

3 a Pay back concept

4 d Monetary unit assumption

Owner's equity can be described as

1 b ownership claim on total assets.

2 c benefactor's claim on total assets.

3 a creditorship claim on total assets.

4 d debtor claim on total assets.

Which of the following is true regarding the corporate form of business

organization?

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

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

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

partnerships and proprietorships.

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

proprietor-Owner's equity is best depicted by the following:

1 a Assets = Liabilities.

2 c Residual equity + Assets.

3 d Assets – Liabilities.

4 b Liabilities + Assets.

Collection of a $1,000 Accounts Receivable

1 d decreases an asset $1,000; decreases a liability $1,000.

2 b increases an asset $1,000; decreases a liability $1,000.

3 a increases an asset $1,000; decreases an asset $1,000.

4 c decreases a liability $1,000; increases owner's equity $1,000.

If total liabilities decreased by $15,000 and owner’s equity increased by

$10,000 during a period of time, then total assets must change by what

amount and direction during that same period?

1 a $25,000 decrease

2 d $25,000 increase

3 c $5,000 increase

4 b $5,000 decrease

A business that enjoys limited liability is a

1 b partnership.

2 c corporation.

3 d sole proprietorship.

4 a proprietorship.

A net loss will result during a time period when

1 d revenues exceed expenses.

2 c expenses exceed revenues.

3 b drawings exceed investments.

4 a liabilities exceed assets.

A problem with the monetary unit assumption is that

1 d it is impossible to account for international transactions.

2 b the dollar has been stable over time.

3 a the dollar has not been stable over time.

4 c the dollar is a common medium of exchange.

John and Sam 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

1 c corporation.

2 a joint venture.

1 d $23,000 increase.

2 c $11,000 increase.

3 a $23,000 decrease.

4 b $11,000 decrease.

Sources of increases to owner's equity are

1 a additional investments by owners.

2 c withdrawals by the owner.

3 d expenses.

4 b purchases of merchandise.

Capital is

1 d equal to liabilities plus drawings.

2 a an owner's permanent investment in the business.

3 c equal to assets minus owner's equity.

4 b equal to liabilities minus owner's equity.

A basic assumption of accounting assumes that the dollar is

1 c the common unit of measure for all business transactions.

2 a unrelated to business transactions.

3 b a poor measure of economic activities.

4 d useless in measuring an economic event.

If total liabilities increased by $15,000 and owner’s equity increased by

$10,000 during a period of time, then total assets must change by what amount and direction during that same period?

1 c $5,000 increase

2 d $25,000 increase

$35,000, what amount of owner drawings were made during the month?

1 b $2,000

2 d $5,000

3 c $3,000

4 a $0

Misra Company compiled the following financial information as of December

31, 2011: Revenues: $170,000; Owner’s Capital (1/1/11): 70,000; Equipment: 40,000; Expenses: 125,000; Cash: 45,000; Owner’s Drawings: 10,000;

Supplies: 5,000; Accounts payable: 20,000; Accounts receivable: 35,000; Misra’s assets on December 31, 2011 are

1 d $245,000.

2 b $125,000.