209 test bank for financial accounting weygandt 8th edition

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209 Test Bank for Financial Accounting Weygandt 8th Edition

True False Questions - Free Text Questions - Multiple Choice

Questions

Communication of economic events is the part of the

accounting process that involves

1 a.identifying economic events.

2 b.quantifying transactions into dollars and cents.

3 c.preparing accounting reports.

4 d.recording and classifying information.

Martin Corporation purchased land in 2007 for $290,000 In

2013, it purchased a nearly identical parcel of land for $460,000

In its 2013 balance sheet, Martin valued these two parcels of land at a combined value of $920,000 By reporting the land in this manner, Martin Corp has violated the

1 a.cost principle

2 b.convergence

3 c.economic entity assumption

4 d.monetary unit assumption

The use of computers in recording business events

1 a.has made the recording process more efficient.

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

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

4 d.is economical only for large businesses.

The SEC and FASB are two organizations that are primarily

responsible for establishing generally accepted accounting principles It is true that

1 a.they are both governmental agencies.

2 b.the SEC is a private organization of accountants.

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

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

A problem with the monetary unit assumption is that

1 a.the dollar has not been stable over time.

2 b.the dollar has been stable over time.

3 c.the dollar is a common medium of exchange.

4 d.it is impossible to account for international transactions.

Which of the following is an external user of accounting

The proprietorship form of business organization

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

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

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.

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

1 a.Regulatory agencies.

2 b.Customers.

3 c.Investors.

4 d.All of these are external users.

The first step in solving an ethical dilemma is to

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

2 b.identify the alternatives.

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

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

All of the following statements are correct except

1 a.Good decision-making depends on good information.

2 b.A vital element in communicating economic events is the accountant's ability to analyze and interpret reported information.

3 c.The origins of accounting are generally attributed to Socrates, a classical Greek philosopher, who promoted accounting as a social contract.

4 d.The information that a user of financial information needs depends upon the kinds of decisions the user makes.

Financial accounting provides economic and financial

information for all of the following except

All of the following are steps in analyzing ethics cases in

financial reporting except

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

2 b.contact law enforcement regarding any violations of corporate ethics codes

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

stakeholders.

4 d.recognize an ethical situation and the ethical issues involved.

The origins of accounting are generally attributed to the work of

A basic assumption of accounting assumes that the dollar is

1 a.unrelated to business transactions.

2 b.a poor measure of economic activities.

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

4 d.useless in measuring an economic event.

The private sector organization involved in developing

accounting principles is the

1 a.Feasible Accounting Standards Body.

2 b.Financial Accounting Studies Board.

3 c.Financial Accounting Standards Board.

4 d.Financial Auditors' Standards Body.

Accountants refer to an economic event as a

Bookkeeping differs from accounting in that bookkeeping

primarily involves which part of the accounting process?

1 a.Identification.

2 b.Communication.

3 c.Recording.

4 d.Analysis.

Which of the following techniques are not used by accountants

to interpret and report financial information?

1 a.Graphs.

2 b.Special memos for each class of external users.

3 c.Charts.

4 d.Ratios.

The final step in solving an ethical dilemma is to

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

2 b.recognize an ethical situation.

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

4 d.recognize the ethical issues involved.

Which of the following would not be considered an internal user

of accounting data for the GHI Company?

1 a.President of the company.

2 b.Production manager.

3 c.Merchandise inventory clerk.

4 d.President of the employees' labor union.

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

1 a.Internal Revenue Service Agent.

statements for Andre's Fine Wines, the accounting concept most relevant to the presentation of Andre's home is

1 a.the economic entity assumption.

2 b.the fair value principle.

3 c.the monetary unit assumption.

A business organized as a corporation

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

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

3 c.is owned by its stockholders.

4 d.terminates when one of its original stockholders dies.

The body of theory underlying accounting is not based on

1 a.physical laws of nature.

1 a.stand alone concept.

2 b.monetary unit assumption.

3 c.corporate form of ownership.

4 d.economic entity assumption.

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

1 a.economic entity assumption.

2 b.cost principle.

3 c.historical cost principle.

4 d.monetary unit assumption.

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

1 a.$100 million.

2 b.$600 million.

3 c.$400 million.

4 d.$500 million.

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.

The cost of an asset and its fair value are

1 a.never the same.

2 b.the same when the asset is sold.

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

4 d.the same on the date of acquisition.

Owners enjoy limited liability in a

1 a.proprietorship.

The economic entity assumption requires that the activities

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

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

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

of its owners.

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

The process of recording transactions has become more

efficient because

1 a.fewer events can be quantified in financial terms.

2 b.computers are used in processing business events.

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

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

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 c.recording nonquantifiable economic events.

4 d.analyzing and interpreting financial reports.

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 b.The purchase of a new computer.

3 c.The sale of store equipment.

4 d.Payment of income taxes.

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.

Accounting consists of three basic activities which are related

to economic events of an organization These include

1 a.identifying, recording, and communicating

2 b.identifying, calculating, and responding

3 c.classifying, numbering, and reporting

4 d.issuing, reporting, and classifying

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 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.

Which of the following would not be considered internal users

of accounting data for a company?

1 a.The president of a company.

2 b.The controller of a company.

3 c.Creditors of a company.

4 d.Salesmen of the company.

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 c.Unlimited personal liability for stockholders

4 d.Unlimited life

Generally accepted accounting principles are

1 a.income tax regulations of the Internal Revenue Service.

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.

A small neighborhood barber shop that is operated by its owner would likely be organized as a

1 a.joint venture.

2 b.partnership.

3 c.corporation.

4 d.proprietorship.

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 a.convergence

2 b.monetary unit assumption

3 c.the cost principle

4 d.the fair value principle

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 a.Pay back concept

2 b.Economic entity assumption

3 c.Cash basis concept

4 d.Monetary unit assumption

The accounting process is correctly sequenced as

1 a.identification, communication, recording.

2 b.recording, communication, identification.

3 c.identification, recording, communication.

4 d.communication, recording, identification.

148 Free Test Bank for Financial Accounting 8th Edition

by Weygandt Multiple Choice Questions - Page 2

The basic accounting equation cannot be restated as

1 a.Assets – Liabilities = Stockholders' Equity.

2 b.Assets – Stockholders' Equity = Liabilities.

3 c.Stockholders' Equity + Liabilities = Assets.

4 d.Assets + Liabilities = Stockholders' Equity.

If total liabilities decreased by $25,000 and stockholders' 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 a.$25,000 decrease

2 b.$5,000 decrease

3 c.$5,000 increase

4 d.$25,000 increase

Stockholders' equity is often referred to as

1 a.The percentage of total assets held in cash.

2 b.Assets consumed in the process of earning revenues.

3 c.The profitability of the business.

4 d.The amount of dividends declared and paid to stockholders.

The accounting equation for Quattro Enterprises is as follows:

$120,000 (Assets) =$60,000 (Liabilities) +$60,000 (Stockholders' Equity) If Quattro purchases office equipment on account for

$15,000, the accounting equation will change to

1 a.$120,000 (Assets) = $60,000 ((Liabilties) +$60,000(Stockholders' Equity)

2 b.$135,000 ((Assets) = $60,000 ((Liabilties) +$75,000(Stockholders' Equity)

3 c.$135,000 ((Assets) = $67,500 ((Liabilties) +$67,500 (Stockholders' Equity)

4 d.$135,000 ((Assets) = $75,000 (Liabilties) +$60,000 (Stockholders' Equity)

Sources of increases to stockholder's equity are

1 a.additional investments by owners.

2 b.purchases of merchandise.

3 c.dividends.

4 d.expenses.

Stockholders' equity can be described as

1 a.creditorship claim on total assets.

2 b.ownership claim on total assets.

3 c.benefactor's claim on total assets.

4 d.debtor claim on total assets.

Which of the following will not cause a change in the

stockholders' equity of a business?

1 a.An increase in prepaid expenses.

2 b.An increase in retained earnings.

3 c.The sale of common stock.

4 d.The declaration and payment of dividends.

Liabilities of a company would not include

1 a.notes payable.

2 b.accounts payable.

3 c.salaries and wages payable.

4 d.cash.

As of June 30, 2013, Actual Tigers Company has assets of

$100,000 and stockholders' equity of $30,000 What are the liabilities for Actual Tigers Company as of June 30, 2013?

Liabilities of a company are owed to

1 a.debtors.

2 b.benefactors.

3 c.creditors.

4 d.underwriters.

A net loss will result during a time period when

1 a.liabilities exceed assets.

2 b.dividends exceed investments.

3 c.expenses exceed revenues.

4 d.revenues exceed expenses.

When assets are distributed to the owners of a corporation, these distributions are termed

1 a.depletions.

2 b.consumptions.

3 c.dividends.

4 d.a credit line.

If total liabilities increased by $17,000 during a period of time and stockholders' equity decreased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)

1 a.$23,000 decrease.

2 b.$11,000 decrease.

3 c.$11,000 increase.

4 d.$23,000 increase.

If total liabilities increased by $15,000 and stockholders' 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.are future economic benefits.

2 b.are existing debts and obligations.

3 c.possess service potential.

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

Stockholders' equity is decreased by

If total assets equal $345,000 and total stockholders' equity equal $120,000, then total liabilities must equal

1 a.$465,000.

2 b.$225,000.

3 c.$120,000.

4 d.There is not enough information given to determine this.

The basic accounting equation may be expressed as

1 a.Assets = Equities.

2 b.Assets – Liabilities = Stockholders' Equity.

3 c.Assets = Liabilities + Stockholders' Equity.

4 d.all of these.

A dividend is

1 a.a distribution of the company's earnings to its stockholders.

2 b.equal to liabilities minus stockholders' equity.

3 c.equal to assets minus stockholders' equity.

4 d.equal to revenues less expenses

If the transaction causes an asset account to decrease, which of the following related effects may occur?

1 a.An increase of equal amount in the common stock account.

2 b.An increase in a liability account.

3 c.An increase of equal amount in another asset account.

4 d.An increase in the combined total of liabilities and stockholders' equity.

148 Free Test Bank for Financial Accounting 8th Edition

by Weygandt Multiple Choice Questions - Page 3

Druganaut Company buys a $21,000 van on credit The

transaction will affect the

1 a.income statement only.

2 b.balance sheet only.

3 c.income statement and retained earnings statement only.

4 d.income statement, retained earnings statement, and balance sheet.

A proprietorship is a business

1 a.owned by one person.

2 b.owned by two or more persons.

3 c.organized as a separate legal entity under state corporation law.

4 d.owned by a governmental agency.

Mofro’s Computer Repair Shop started the year with total assets

of $270,000 and total liabilities of $180,000 During the year, the business recorded $450,000 in computer repair revenues,

$270,000 in expenses, and Mofro paid dividends of $45,000 The net income reported by Mofro's Computer Repair Shop for the year was

1 a.$90,000.

2 b.$135,000.

3 c.$180,000.

4 d.$225,000.

Teamboo Company’s stockholders' equity at the beginning of August 2013 was $300,000 During the month, the company earned net income of $70,000 and paid dividends of $30,000 At the end of August 2013, what is the amount of stockholders' equity?

Misra Company compiled the following financial information as

of December 31, 2013: Revenues $170,000; Retained earnings (1/1/13)30,000; Equipment 40,000; Expenses 125,000; Cash 45,000; Dividends 10,000; Supplies 5,000; Accounts payable 20,000; Accounts receivable 35,000; Common stock 40,000 Misra’s assets on December 31, 2013 are

2 b.gross increases in stockholders' equity resulting from business activities.

3 c.the cost of services used during the period.

4 d.actual or expected cash outflows.

Black Keys Company began the year with stockholders' equity

of $185,000 During the year, the company recorded revenues of

$250,000, expenses of $190,000, and paid dividends of $20,000 What was Black Keys’ stockholders' equity at the end of the year?

1 a.$185,000.

2 b.$225,000.

3 c.$245,000.

4 d.$265,000.

Mofro’s Computer Repair Shop started the year with total assets

of $270,000 and total liabilities of $180,000 During the year, the business recorded $450,000 in computer repair revenues,

$270,000 in expenses, and Mofro paid dividends of $45,000 Mofro's stockholders' equity changed by what amount from the beginning of the year to the end of the year?

1 a.$90,000.

2 b.$135,000.

3 c.$180,000.

4 d.$225,000.

Proprietorships, partnerships, and corporations

1 a are the three most common forms of business organizations in the U.S.

2 b are the three most common forms of business organizations internationally.

3 c are used in different proportions in different countries.

4 d all of the above are true.

Which of the following is not part of the accounting process?

If total liabilities increased by $8,000, then

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

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

3 c.assets must have increased by $8,000, or stockholders' equity must have decreased

by $8,000.

4 d.assets and stockholders' equity each increased by $4,000.

At October 1, Arcade Fire Enterprises reported stockholders' equity of $35,000 During October, common stock of $5,000 was issued and the company posted a net loss of $2,000 If

stockholders' equity at October 31 totals $35,000, what amount

of dividends were paid during the month?

1 a.$0

2 b.$2,000

3 c.$3,000

4 d.$5,000

Net income results when

4 d.statement of cash flows.

Which of the following is not a reason one set of international accounting standards are needed?

A net loss will result during a time period when

1 a.assets exceed liabilities.

2 b.assets exceed stockholders' equity.

3 c.expenses exceed revenues.

4 d.revenues exceed expenses.

If expenses are paid in cash, then

1 a.assets will increase.

2 b.liabilities will decrease.

3 c.stockholders' equity will increase.

4 d.assets will decrease.

If a corporation distributes cash to its stockholders', then

1 a.there has been a violation of accounting principles.

2 b.stockholders' equity will increase.

3 c.stockholders' equity will decrease.

4 d.there will be a new liability showing the stockholders owes money to the business.

International standards are referred to as

1 a IFRS.

2 b GAAP.

3 c IASB.

4 d FASB.

During the year 2013, Dilego Company earned revenues of

$45,000, had expenses of $28,000, purchased assets with a cost

of $5,000 and paid dividends of $3,000 Net income for the year

4 d all of the above are reasons one set of international accounting standards are needed.

Auditing is

1 a.the examination of financial statements by a CPA in order to express an opinion on their fairness.

2 b.a part of accounting that involves only recording of economic events.

3 c.an area of accounting that involves such activities as cost accounting, budgeting, and accounting information systems.

4 d.conducted by the Securities and Exchange Commission to ensure that registered financial statements are presented fairly.

Which list below best describes the major services performed

by public accountants?

1 a.Bookkeeping, mergers, budgets.

2 b.Employee training, auditing, bookkeeping.

3 c.Auditing, taxation, management consulting.

4 d.Cost accounting, production scheduling, recruiting.

GAAP, compared to IFRS, tends to be more

1 a simple in accounting requirements.

2 b rules-based.

3 c principles-based.

4 d simple in disclosure requirements.