237 test bank for financial accounting information for decisions 6th edition by wild

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237 Test Bank for Financial Accounting Information for Decisions 6th Edition by Wild

True False Questions Free Text Questions

-Mutiple Choice Questions-Page 1

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

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 called the:

1 A Going-concern principle

2 B Cost principle

3 C Revenue recognition principle

4 D Objectivity principle

5 E Business entity principle

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

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 Monetary unit principle

3 C Revenue recognition principle

1 A Business entity principle

2 B Monetary unit principle

3 C Going-concern principle

4 D Cost principle

5 E Measurement principle

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

Generally Accepted Accounting Principles:

1 A Focus on the review of a situation

2 B Does not require financial statements

Internal users of accounting information include:

1 A Objectivity principle

2 B Realization principle

3 C Business entity principle

4 D Going-concern 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

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 accounting principles would prescribe that all goods and services purchased is recorded at cost?

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

A partnership:

1 A Is also called a sole proprietorship

2 B Has unlimited liability

3 C Has to have a written agreement in order to be legal

4 D Is a legal organization separate from its owners

5 E Has owners called shareholders

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

On December 15, 2010, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in

2011 Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2011 and not 2010?

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 area of accounting aimed at serving the decision making needs of internal users is:

1 A Financial accounting

2 B Purchasing office equipment

3 C Borrowing money from a bank

4 D Selling stock

5 E Paying off a loan

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

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

A corporation:

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

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

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

The financing functions of a business include:

1 A Research and development

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 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

Which of the following elements are found on the Balance Sheet?

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 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

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 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

Which of the following elements are found on the income

1 A Revenue recognition principle

2 B Monetary unit principle

3 C Business entity principle

4 D Matching principle

5 E Full disclosure principle

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

Businesses can take all of the following forms except:

1 A Sole proprietorship

2 B Common stock

3 C Partnership

4 D Corporation

5 E Limited Liability Corporation

Internal users of accounting information always include:

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

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 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

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

Marian Mosely is the owner of Mosely Accounting Services Which accounting assumption requires Marian to keep her

personal financial information separate from the financial

information of Mosely Accounting Services?

1 A Monetary unit assumption

2 B Going-concern assumption

3 C Cost assumption

4 D Business entity assumption

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

137 Free Test Bank for Financial Accounting Information for Decisions 6th Edition by Wild Mutiple Choice

Questions-Page 2

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

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

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

Reebok had income of $150 million and average assets of

$1,800 million Its return on assets is:

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

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

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 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

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

Nike had income of $350 million and average assets of $2,000 million Its return on assets is:

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

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

The description of the relation between a company's assets, liabilities and equity, which is expressed as Assets = Liabilities + Equity is 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

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

The excess of expenses over revenues for a period 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

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

Assets created by selling goods and services on credit are:

1 A Accounts payable

2 B Accounts receivable

3 C Liabilities

4 D Expenses

5 E Equity

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

4 D Are also called asset management

5 E Are also called strategic management

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

Resources owned or controlled by a company that are expected

to yield benefits are:

$23,000 respectively What is the total amount of the

corporation's assets after this transaction has been recorded?

Our company has three times as many assets as it does

liabilities If total liabilities are $55,000, what is the amount of owners' equity?

1 A $55,000

2 B $110,000

3 C $165,000

4 D $220,000

5 E Cannot be determined from the given information

If the assets of a business increased $15,000 during a period of time and its equity decreased $4,000 during the same period, liabilities in the business must have:

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 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

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

beginning assets of $120,000 and ending assets of $176,000

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

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

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

Net income is:

1 A Assets minus liabilities

2 B The excess of revenues over expenses

3 C An asset

4 D The same as revenue

5 E The excess of expenses over retained earnings

Distributions of assets by a business to its stockholders are called:

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 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

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

5 E Increased $156,000

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

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

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

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 were the Beginning Liabilities for the year?

Ending Liabilities are 67,000, Beginning Equity was $87,000, Common Stock sold during year totaled $31,000, Expenses for the year were $22,000, Dividends declared totaled $13,000,

Ending Equity for the year is $181,000 and Beginning Assets for the year were $222,000 What was Revenue for the year?

A company purchases supplies on account, what is the effect

on the accounting equation?

1 A assets decrease; equity increases

2 B assets decrease; equity decreases

3 C liabilities decrease; equity decreases

4 D liabilities increase; equity increases

5 E liabilities increase; assets increase

If Beginning Retained Earnings was $184,300, the company distributed $46,000 in dividends and Ending Retained Earnings was $345,000, what was the net income for the period?

The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses is called a(n):

1 A Balance sheet

2 B Statement of retained earnings

3 C Statement of cash flows

4 D Income statement

5 E Statement of financial position

A financial statement providing information that helps users understand a company's financial status and which lists the types and amounts of assets, liabilities and equity as of a specific date is called a(n):

1 A Balance sheet

2 B Income statement

3 C Statement of cash flows

4 D Statement of retained earnings

5 E Financial status statement

Fast-Forward has beginning equity of $257,000, net income of

$51,000, dividends of $40,000 and investments by owners in exchange for stock of $6,000 Its ending equity is:

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 were the total dividends declared?

$180,000; Interest expense………10,000; Rent

expense………20,000; Consulting revenue………

400,000

1 A $190,000

2 B $210,000

3 C $230,000

4 D $400,000

5 E $610,000

Ending Liabilities are 67,000, Beginning Equity was $87,000, Common Stock sold during year totaled $31,000, Expenses for the year were $22,000, Dividends declared totaled $13,000,

Ending Equity for the year is $181,000 and Beginning Assets for the year were $222,000 What was Net Income for the year?

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 are the Ending Liabilities for the year?

The income statement reports all of the following except:

1 A Revenues earned by a business

2 B Expenses incurred by a business

3 C Assets owned by a business

4 D Net income or loss earned by a business

5 E The time period over which the earnings occurred

Below is accounting information for Cascade Company for

2010: Revenue $416,000; Cash $120,000; Common Stock

$200,000; Expenses $300,000; Equipment $240,000; Accounts Receivable $35,000; Notes Payable $50,000; Notes Receivable

$62,000 What was Total Equity for the year?