206 test bank for financial and managerial accounting information for decisions 4th edition

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206 Test Bank for Financial and Managerial Accounting Information for Decisions 4th Edition

True False Questions Free Text Questions

Multiple Choice Questions-Page 1

Social responsibility:

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

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

The primary objective of financial accounting is:

1 A To serve the decision-making needs of internal users

2 B To provide financial statements to help external users analyze and interpret an organization's activities

3 C To monitor and control company activities

4 D To provide information on both the costs and benefits of managing products and services

5 E To know what, when and how much to produce

Which of the following statements is true of external information

users?

1 A They are directly involved in managing the organization

2 B Their needs are met by the managerial area of accounting

3 C They have limited access to an organization's accounting information

4 D They use accounting information to help improve the efficiency and effectiveness of

Which accounting assumption assumes that all accounting

information is 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

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

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 and what the company paid for them

Which of the following elements are found on the Balance

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

Which of the following elements are found on the income

statement?

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:

5 E Limited Liability Corporation

Ethical behavior requires:

1 A That an auditors' 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

An Asset is:

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

Which of the following is the correct sequence for the heading

for ABC Company's 2010 Balance Sheet?

1 A ABC Company, For the year ended 12/31/10, Balance Sheet

2 B For the year ended 12/31/10, Balance Sheet, ABC Company

3 C Balance Sheet, 12/31/10, ABC Company

4 D 12/31/10, ABC Company, Balance Sheet

5 E ABC Company, Balance Sheet, 12/31/10

The principle that (1) requires revenue to be recognized at the

time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash and (3)

measures the amount of revenue as the cash plus the

cash equivalent value of any non-cash assets received from customers in exchange for goods or services is

5 E Business entity principle

The area of accounting aimed at serving the decision making

needs of internal users is:

1 A Focus on the review of a situation

2 B Does 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

Recording the items on the financial statements in dollars is:

1 A Objectivity principle

2 B Monetary unit principle

3 C Revenue recognition principle

4 D Going-concern principle

5 E Cost principle

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

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

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 deceive stockholders

4 D To keep from paying taxes

5 E To establish credit for a company

The organization that attempts to create more harmony among

the accounting practices of different countries by

identifying preferred practices and encouraging their worldwide acceptance is the:

The financing functions of a business include:

1 A Research and development

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

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

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 Cost principle

5 E Objectivity principle

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 Going-concern principle

2 B Business entity principle

3 C Objectivity principle

4 D Cost Principle

5 E Monetary unit principle

126 Free Test Bank for Financial and Managerial

Accounting Information for Decisions 4th Edition by Wild Multiple Choice Questions-Page 2

5 E Are also called strategic management

Resources owned or controlled by a company that are expected

to yield benefits 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

Increases in retained earnings from a company's earnings

Which of the following accounting principles would prescribe

that all goods and services purchased is recorded at

On December 15, 2008, Myers Legal Services signed a $50,000

contract with a client to provide legal services to the

client in 2009 Which accounting principle would require Myers Legal Services to record the legal fees revenue in

2009 and not 2008?

1 A Monetary unit principle

2 B Going-concern principle

3 C Cost principle

4 D Business entity principle

5 E Revenue recognition principle

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

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

An example of an operating activity is:

1 A Paying wages

2 B Purchasing office equipment

3 C Borrowing money from a bank

4 D Selling stock

5 E Paying off a loan

Expenses:

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 creditor's claims on assets

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

The difference between a company's assets and its liabilities or

its net assets is:

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

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

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

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

A limited partnership:

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

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

Net Income:

1 A Decreases equity

2 B Represents the amount of assets owners put into a business

3 C Equals assets minus liabilities

4 D Is the excess of revenues over expenses

5 E Represents the owners' claims against assets

Marian Mosely is the owner of Mosely Accounting Services

Which accounting principle requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services?

1 A Monetary unit principle

2 B Going-concern principle

3 C Cost principle

4 D Business entity principle

5 E None of these Since Marian is a sole proprietor, she is not required to separate her personal financial information from the financial information of Mosely Accounting Services

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

The question of when revenue should be recognized on the

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

1 A Revenue recognition principle

2 B Going-concern principle

3 C Objectivity principle

4 D Business entity principle

5 E Cost principle

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 6 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

Assets = Liabilities + Equity is known as the:

1 A Income statement equation

2 B Cost principle

3 C Objectivity principle

4 D Accounting equation

5 E Transaction principle

The amounts reported in the accounts for assets used in

operations are based on their costs This practice is best justified by the:

1 A Cost principle

2 B Going-concern principle

3 C Objectivity principle

4 D Business entity principle

5 E Revenue recognition principle

An example of an investing activity is:

1 A Paying wages of employees

2 B Paying dividends

3 C Purchasing land

4 D Selling inventory

5 E Contribution from owner

Decreases in retained earnings that represent costs of assets or

services that are used to earn revenues are called:

The description of the relation between a company's assets,

liabilities and equity, which is expressed as Assets =

Liabilities + Equity are known as the:

1 A Income statement equation

2 B Accounting equation

3 C Business equation

4 D Return on equity ratio

5 E Net income

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

126 Free Test Bank for Financial and Managerial

Accounting Information for Decisions 4th Edition by Wild Multiple Choice Questions-Page 3

Which of the following statements regarding account

classification is true?

1 A Assets and revenues are the same thing

2 B If employees have not yet been paid for their work, the company has wages payable

3 C Retained earnings equal cash which the company has earned and kept

4 D Revenue is another term for profit

5 E Revenue minus expense equals retained earnings

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

liabilities If total liabilities are $50,000, what amounts of assets are owned by the company?

1 A $50,000

2 B $100,000

3 C $150,000

4 D $200,000

5 E Cannot be determined from the given information

Photometer Company paid off $30,000 of its accounts payable

in cash What would be the effects of this transaction on the accounting equation?

1 A Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase

2 B Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect

3 C Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect

4 D Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase

5 E Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease

If assets are $365,000 and equity is $120,000, then liabilities are:

An exchange of value between two entities is called:

1 A The accounting equation

2 B Recordkeeping or bookkeeping

3 C A business transaction

4 D An asset

5 E Net Income

If the assets of a business increased $15,000 during a period of

time and its equity decreased $46,000 during the same period, liabilities in the business must have:

The assets of a company total $700,000; the liabilities, $200,000

What are the total claims of the owners?

1 A $900,000

2 B $700,000

3 C $500,000

4 D $200,000

5 E It is impossible to determine unless the amount of owners' investment is known

Apatha Company has assets of $600,000, liabilities of $250,000

and equity of $350,000 It buys office equipment on credit for $75,000 The effects of this transaction include:

1 A Assets increase by $75,000 and expenses increase by $75,000

2 B Assets increase by $75,000 and expenses decrease by $75,000

3 C Liabilities increase by $75,000 and expenses decrease by $75,000

4 D Assets decrease by $75,000 and expenses decrease by $75,000

5 E Assets increase by $75,000 and liabilities increase by $75,000

Fast-Forward 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

If the assets of a business increased $89,000 during a period of

time and its liabilities increased $67,000 during the same period, equity in the business must have:

1 A Increased $22,000

2 B Decreased $22,000

3 C Increased $89,000

4 D Decreased $156,000

Compute return on assets given net income of $13,764,

beginning assets of $120,000 and ending assets of

The balance sheet equation is:

1 A Revenues minus expenses equal net income

2 B Debits equal credits

3 C The bookkeeping phase of accounting

4 D Another name for the accounting equation

5 E Assets minus liabilities and equity

Consider the risk of the following investments Choose the

answer that lists the investments in order from highest expected return to lowest expected return

1 A Drilling exploration to discover oil, stock in a secure "blue chip" corporation,

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

A corporation purchased a $40,000 delivery truck by paying

4,000 cash and signing a $36,000 note payable

Immediately prior to this transaction the corporation had assets, liabilities and owners' equity in the amounts of

$75,000; $52,000; and $23,000 respectively What is the total amount of the corporation's assets after this

transaction has been recorded?

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

Nike had income of $350 million and average assets of $2,000

million Its return on assets is:

U.S government bonds are:

1 A High-risk and high-return investments

2 B Low-risk and low-return investments

3 C High-risk and low-return investments

4 D Low-risk and high-return investments

5 E High risk and no-return investments

Return on assets is:

1 A Also called rate of return

2 B Computed by dividing net income by beginning assets plus ending assets divided by two

3 C Computed by multiplying net income by total assets

4 D Used in helping evaluate expenses

5 E Found on the balance sheet

Viscount Company collected $42,000 cash on its accounts

receivable How does this transaction affect the

company's accounting equation?

1 A Assets decrease and equity increases

2 B Both assets and liabilities decrease

3 C Assets, liabilities and equity are unchanged

4 D Both assets and equity are unchanged and liabilities increase

5 E Assets increase and equity decreases

Our company has three times as many assets as it does

liabilities If total liabilities are $55,000, what is the amount

5 E Cannot be determined from the given information

The excess of expenses over revenues for a period is:

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 $240,000

2 B $250,000

How would the accounting equation of Boston Company be

affected by the billing of a client for $10,000 of consulting work completed?

1 A + $10,000 accounts receivable, -$10,000 accounts payable

2 B + $10,000 accounts receivable, + $10,000 accounts payable

3 C + $10,000 accounts receivable, + $10,000 cash

4 D + $10,000 accounts receivable, + $10,000 consulting revenue

5 E + $10,000 accounts receivable, -$10,000 consulting revenue

If the liabilities of a business increased $75,000 during a period

of time and the equity in the business decreased $30,000 during the same period, the assets of the business must have:

1 A Net income divided by average total assets

2 B The reward for investment

3 C The uncertainty about the expected return that will be earned from an investment

4 D Unrelated to expected return

5 E Derived from the idea of getting something back from an investment

126 Free Test Bank for Financial and Managerial

Accounting Information for Decisions 4th Edition by Wild Multiple Choice Questions-Page 4

Beginning Assets were $700,000, Beginning Equity was

$225,000, Revenue for the year was $523,000, Common Stock sold during the year totaled $320,000, Expenses for the year were $392,000, Ending Equity is $751,000, and Ending Assets are $963,000 What is Net Income for the year?

Beginning Assets were $437,600, Beginning Liabilities were

$262,560, Common Stock sold during the year totaled

$45,000, Revenue for the year was $414,250, Expenses for the year were $280,000, Dividends declared was $22,700, and Ending Liabilities is $350,000 What was the

Beginning Equity for the year?

The financial statement that shows: beginning and ending

retained earnings balances and the effects of net income (loss) and a dividend for the period is the:

1 A Statement of financial position