222 test bank for financial accounting IFRS edition 2nd

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222 Test Bank for Financial Accounting IFRS Edition 2nd

True False Questions

Most companies in the United States follow standards issued by the IASB

1 True

2 False

Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should be kept separate from the personal activities of the owners

The State Administration of Taxation in the People's Republic of China is an example of an internal user of accounting

1 True

2 False

The process of reducing the differences between Generally Accepted Accounting Principles and International Financial Reporting Standards is known as convergence

The monetary unit assumption states that transactions that can

be measured in terms of money should be recorded in the

accounting records

1 True

2 False

Management consulting includes examining the financial

statements of companies and expressing an opinion as to the fairness of their presentation

Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CAs and CPAs

The ending retained earnings balance is reported on the

statement of financial position

External transactions involve economic events between the company and some other enterprise or party

The primary purpose of the statement of cash flows is to

provide information about the cash receipts and cash payments

of a company during a period

1 True

2 False

IFRS follows one measurement principle known as the

historical cost principle

1 True

2 False

Management of a business enterprise is the major external user

The economic entity assumption requires that the activities of

an entity be kept separate and distinct from the activities of its owner and all other economic entities

1 True

2 False

Internal transactions do not affect the basic accounting

equation because they are economic events that occur entirely within one company

Accounting information is used only by external users with a financial interest in a business enterprise

The German Confederation of Trade Unions is an example of an external user of accounting information

1 True

2 False

The Financial Accounting Standards Board is a part of the

International Accounting Standards Board

1 True

2 False

The purchase of office equipment on credit increases total

assets and total liabilities.

The monetary unit assumption requires that all dollar amounts

be rounded to the nearest dollar

1 True

2 False

Accounting communicates financial information about a

business enterprise to both internal and external users

Multiple Choice Questions - Page 1

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

1 a right or wrong.

2 b honest or dishonest.

3 c fair or unfair.

4 d All of these answer choices are correct.

Bookkeeping primarily involves which of the following parts of the accounting process?

1 a Identification.

2 b Communication.

3 c Recording.

4 d Analysis.

Recording of economic events involves

1 a keeping a systematic, chronological diary of events.

2 b analyzing reported information.

3 c explaining the meaning of reported data.

4 d preparing accounting reports.

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.

The fair value principle

1 a is one of the two costing principles followed by the IASB.

2 b is more useful than the historical cost principle for valuing some assets.

3 c dictates that an asset should be valued at the price at which it could be sold.

4 d All of these answer choices are correct.

Liabilities of a company are owed to

1 a debtors.

2 b benefactors.

3 c creditors.

4 d underwriters.

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 a company.

The Duce Company has five plants nationwide that cost $200 million The current fair value of the plants is $500 million The plants will be recorded and reported as assets at

1 a $200 million.

2 b $700 million.

3 c $300 million.

4 d $500 million.

Liabilities of a company would not include

1 a notes payable.

2 b accounts payable.

3 c wages payable.

4 d cash.

The proprietorship form of business organization

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

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

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 answer choices are correct.

Internal users of accounting information include all of following except the

1 a CEO of Sony.

2 b Human Resources department at Hyundai.

3 c Marketing department at Braun.

4 d Shareholders of Airbus.

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 accounting 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 assumption that enables accounting to quantify (measure) economic events is the

1 a economic entity assumption.

2 b cost principle.

3 c historical cost principle.

4 d monetary unit assumption.

A business whose owners enjoy limited liability is a

2 b Management.

3 c Creditors.

4 d Customers.

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.

Convergence refers to

1 a using the same accounting principles from one period to the next.

2 b use of the same accounting principles by all companies.

3 c the elimination of all accounting standard-setting bodies except the International Accounting Standards Board.

4 d the process of reducing the differences between IFRS and GAAP.

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 a stand alone concept.

2 b monetary unit assumption.

3 c corporate form of ownership.

4 d economic entity assumption.

Which of the following techniques is 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.

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

Hyundai Inc purchased land for W118,000,000 in 2005 At

December 31, 2014, an appraisal determined the fair value of the land is W136,000,0000 If Hyundai follows the cost principle, the land will be reported on the statement of financial position at

3 c tangible nature.

4 d future economic benefit.

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.

Most assets should be valued at cost because fair values

1 a are not useful for decision-making.

2 b may not be representationally faithful.

3 c are not relevant.

4 d may be higher or lower than historical cost.

A business organized as a corporation

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

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.

External users of accounting information include all of following except

1 a the shareholders of Air Italy.

2 b the management of Pirelli.

3 c a potential customers of Olivetti.

4 d All of these answer choices are correct.

Equity is often referred to as

1 a residual equity.

2 b leftovers.

3 c spoils.

4 d second equity.

The basic accounting equation may be expressed as

1 a Assets - Equity = Liabilities.

2 b Assets – Liabilities = Equity.

3 c Assets = Liabilities + Equity.

4 d All of these answer choices are correct.

The accounting process includes each of the following except

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.

The accounting process involves all of the following except

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

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

3 c recording non-quantifiable economic events.

4 d analyzing and interpreting financial reports.

Asian Company purchased land for W92,000,000 in 2000 At December 31, 2014, an appraisal determined the fair value of the land is W106,000,000 The company has an investment in the ordinary shares of another company for which it paid

W49,000,000 in 2012.The shares are actively traded on the

South Korea Stock Exchange The fair value of the investment

at December 31, 2014 is W63,000,000 The land and investment will be reported on the December 31, 2014 statement of financial position at

1 a W92,000,000 and W49,000,000, respectively.

2 b W92,000,000 and W63,000,000, respectively.

3 c W106,000,000 and W49,000,000, respectively.

4 d W106,000,000 and W63,000,000, respectively.

Internal users of accounting information include

1 a the shareholders of Royal Dutch Shell.

2 b the State Administration of Taxation of China.

3 c the Chief Financial officer of Credit Suisse.

4 d the International Accounting Standards Board.

External users of accounting information include the

1 a lnternational Accounting Standards Board.

2 b shareholders of Ferragamo.

3 c Marketing department at Olivetti.

4 d CEO of Air Italy.

When assets are distributed to the shareholders of a

corporation, these distributions are termed

1 a depletions.

2 b consumptions.

3 c dividends.

4 d a credit line.

IFRS are determined by the

1 a Internal Accounting Standards Body.

2 b International Accounting Studies Board.

3 c International Accounting Standards Board.

4 d International Auditors' Standards Body.

Which of the following is an external user of accounting

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.

Which of the following would not be considered an internal user

of accounting data for 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.

The origins of accounting are generally attributed to the work of

1 a Christopher Columbus.

2 b Abner Doubleday.

3 c Luca Pacioli.

4 d Leonardo da Vinci.

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.

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.

Financial accounting provides economic and financial

information for each of the following except

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

1 a Limited liability of shareholders

Rp268,000,000 If the company follows the fair value principle, the investment will be reported in the 2014 financial statement

at

1 a Rp250,000,000 on the statement of financial position.

2 b Rp268,000,000 on the statement of financial position.

3 c Rp250,000,000 on the retained earnings statement.

4 d Rp268,000,000 on the retained earnings statement.

Harrod's Inc purchased land for ₤55,000 in 2004 At December

31, 2014, an appraisal determined the fair value of the land is

₤65,000 If Harrod's follows the historical cost principle, in the

2014 financial statements, the land will be reported at

1 a ₤55,000 on the statement of financial position.

2 b ₤65,000 on the statement of financial position.

3 c ₤55,000 on the income statement.

4 d ₤65,000 on the income statement.

The historical cost principle requires that companies record assets at their

1 a appraisal value.

2 b cost.

3 c market price.

4 d list price.

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.

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.

The body that has the power to prescribe the accounting

practices and standards used by most US companies is the

1 a FASB.

2 b IASB.

3 c GAAP.

4 d IFRS.

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.

172 Free Test Bank for Financial Accounting IFRS

Edition 2nd Edition by Weygandt Multiple Choice

2 b the balance sheet.

3 c the statement of cash flows.

4 d the statement of changes in equity.

If an individual asset is increased, then

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

2 b there must be an equal decrease in equity.

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

4 d None of these answer choices are correct.

As of December 31, 2014, Deitrich Inc had assets of

€13,050,000, liabilities of €4,650,000, share capital of ₤3,300,000 and retained earnings of €5,100,000 Total equity as of that date

As of December 31, 2014, Thames Company reported assets of

₤6,480,000, liabilities of ₤1,920,000 and retained earnings of

₤3,315,000 Share capital reported on the December 31, 2014 statement of financial position is

1 a ₤1,245,000.

2 b ₤1,395,000.

3 c ₤5,235,000.

4 d ₤9,795,000.

As of December 31, 2014, Oxford-welsh Inc had assets of

₤6,520,000, liabilities of ₤1,980,000, and share capital of

₤2,820,000 Retained earnings as of that date are

1 a ₤1,720,000.

1 a decrease Cash and increase Supplies Expense by HK$ 60,000.

2 b increase Cash and decrease Accounts Receivable by HK$30,000.

3 c decrease Cash and decrease Accounts Payable by HK$30,000.

4 d decrease Supplies and increase Supplies Expense by HK$30,000.

If total liabilities increased by ¥35,000 and 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 ¥45,000 decrease

2 b ¥45,000 increase

3 c ¥60,000 increase

4 d ¥70,000 increase

If services are rendered for credit, then

1 a assets will decrease.

2 b liabilities will increase.

3 c equity will increase.

4 d liabilities will decrease.

On January 11, 2014, Britannica Corporation sold ordinary

shares to investors for ₤6,550,000 This transaction will increase assets and

1 a decrease liabilities by ₤6,550,000.

2 b decrease equity by ₤6,550,000.

3 c increase revenues by ₤6,550,000.

4 d increase equity by ₤6,550,000.

A statement of financial position shows

1 a revenues, liabilities, and equity.

2 b expenses, dividends and equity.

3 c revenues, expenses, and dividends.

4 d assets, liabilities, and equity.