Test bank for accounting principles 10th edition

creditorship claim on total assets.. 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 amo

Test Bank for Accounting Principles 10th Edition

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 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

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

1 a Limited liability of stockholders

a

1 a joint venture

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

2 b Corporate businesses are generally smaller in size than partnerships and proprietor-ships

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

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

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

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 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

A business that enjoys limited liability is a

1 a proprietorship

2 b partnership

3 c corporation

4 d sole proprietorship

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

The common characteristic possessed by all assets is

1 a long life

2 b great monetary value

3 c tangible nature

4 d future economic benefit

Owner's equity is best depicted by the following:

2 b Assets – Liabilities = Owner`s Equity

3 c Assets = Liabilities + Owner`s Equity

4 d all of these

Liabilities

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

Liabilities of a company would not include

Owner's 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.

Owner's equity is often referred to as

1 a an owner`s permanent investment in the business

2 b equal to liabilities minus owner`s equity

3 c equal to assets minus owner`s equity

4 d equal to liabilities plus drawings

Revenues would not result from

1 a sale of merchandise

2 b initial investment of cash by owner

3 c performance of services.

4 d rental of property

Sources of increases to owner's equity are

1 a additional investments by owners

2 b purchases of merchandise

3 c withdrawals by the owner

4 d expenses

The basic accounting equation cannot be restated as

1 a Assets – Liabilities = Owner`s Equity

2 b Assets – Owner`s Equity = Liabilities

3 c Owner`s Equity + Liabilities = Assets

4 d Assets + Liabilities = Owner`s Equity

Owner's equity is decreased by all of the following except

1 a owner`s investments

2 b owner`s withdrawals

3 c expenses

4 d owner`s drawings

A net loss will result during a time period when

1 a liabilities exceed assets

2 b drawings exceed investments.

3 c expenses exceed revenues

4 d revenues exceed expenses

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 a $25,000 decrease

2 b $5,000 decrease

3 c $5,000 increase

4 d $25,000 increase

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 b $5,000 decrease

3 c $5,000 increase

4 d $25,000 increase

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 a $40,000 decrease

2 b $10,000 decrease

3 c $10,000 increase

4 d $40,000 increase

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?

As of June 30, 2011, Actual Tigers Company has assets of $100,000 and

owner’s equity of $30,000 What are the liabilities for Actual Tigers Company

Stahl Consulting started the year with total assets of $20,000 and total

liabilities of $5,000 During the year, the business recorded $16,000 in

catering revenues and $10,000 in expenses Stahl made an additional

investment of $3,000 and withdrew cash of $5,000 during the year The

owner’s equity at the end of the year was

1 a $11,000

2 b $18,000

3 c $19,000

4 d $21,000

Stahl Consulting started the year with total assets of $20,000 and total

liabilities of $5,000 During the year, the business recorded $16,000 in

catering revenues and $10,000 in expenses Stahl made an additional

investment of $3,000 and withdrew cash of $5,000 during the year The net income reported by Stahl Consulting for the year was:

1 a $1,000

2 b $4,000

3 c $6,000

4 d $9,000

Stahl Consulting started the year with total assets of $20,000 and total liabilities of $5,000 During the year, the business recorded $16,000 in

catering revenues and $10,000 in expenses Stahl made an additional

investment of $3,000 and withdrew cash of $5,000 during the year Owner’s equity changed by what amount from the beginning of the year to the end of the year?

1 a $0

2 b $4,000

3 c $5,000

4 d $13,000

At October 1, Arcade Fire Enterprises reported owner’s equity of $36,000 During October, no additional investments were made and the company posted a net loss of $4,000 If owner’s equity at October 31 totals $32,000, what amount of owner drawings were made during the month?

$40,000, what amount of owner drawings were made during the month?

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

1 a $0

2 b $2,000

3 c $3,000

4 d $5,000

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

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

Internal users of accounting information include all of the following

The primary accounting standard-setting body in the United States is the

1 a Financial Accounting Standards Board

2 b International Accounting Standards Board

3 c Internal Revenue Service

4 d Securities and Exchange Commission

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

A net loss will result during a time period when

1 a assets exceed liabilities

2 b assets exceed owner`s equity

3 c expenses exceed revenues

4 d revenues exceed expenses

Bright Eyes Downtown Diner received a bill of $600 from the Jronand Wine Advertising Agency The owner, A A Bondy, is postponing payment of the bill until a later date The effect on specific items in the basic accounting

equation is

1 a a decrease in Cash and an increase in Accounts Payable

2 b a decrease in Cash and an increase in Owner’s Capital

3 c an increase in Accounts Payable and a decrease in Owner’s Capital

4 d a decrease in Accounts Payable and an increase in Owner’s Capital

Matador Company purchases $1,300 of equipment from Danger Mouse Inc for cash The effect on the components of the basic accounting equation of

Matador Company is

1 a an increase in assets and liabilities

2 b a decrease in assets and liabilities.

3 c no change in total assets

4 d an increase in assets and a decrease in liabilities

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 owner`s equity statement only

4 d income statement, owner`s equity statement, and balance sheet

Which of the following (a, b, or c) is not a reason one set of international accounting standards are needed?

International standards are referred to as

The internal control standards applicable to Sarbanes-Oxley apply to

1 a all U.S and international companies

2 b U.S and international companies listed on U.S exchanges

3 c International companies listed on U.S exchanges

4 d U.S companies listed on U.S exchanges

The concern about international companies adopting SOX-type standards centers on

1 a cost-benefit analysis

2 b ethics issues

3 c the governing authorities

4 d comparability

Financial accounting ethics violations are

1 a not a problem in the U.S or internationally

2 b much more common in the U.S than internationally.

3 c much more common internationally than in the U.S

4 d a major problem both in the U.S and internationally

IFRS, compared to GAAP, tends to be more

1 a detailed

2 b rules-based

3 c principles-based

4 d full of disclosure requirements

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

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

The conceptual framework that underlies IFRS

1 a is very similar to that used to develop GAAP

2 b does not define assets or liabilities

3 c does not define equity

4 d does not define income or expenses

Accountants refer to an economic event as a

1 a purchase

2 b sale

3 c transaction

4 d change in ownership

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

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.

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 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 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

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

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

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

2 b Management

3 c Creditors

4 d Customers

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 an external user of accounting information?

4 d All of these are external users

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

1 a Identification

2 b Communication

1 a Bookkeeping, mergers, budgets.

2 b Employee training, auditing, bookkeeping

3 c Auditing, taxation, management consulting

4 d Cost accounting, production scheduling, recruiting

Preparing tax returns and engaging in tax planning is performed by

1 a public accountants only

2 b private accountants only

3 c both public and private accountants

4 d IRS accountants only

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

4 d other external users

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

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

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

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