pksmfk
Mar 4, 2010, 07:27 AM
True / False Questions
1. Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable formation about an organization's business activities.
2. Bookkeeping is the same as accounting.
3. Managerial accounting is the area of accounting that provides internal reports to assist the decision making needs of internal users.
4. Internal operating activities include research and development, distribution, and human resources.
5. External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.
6. External users include lenders, shareholders, customers, and regulators.
7. Opportunities in accounting include auditing, consulting, market research, and tax planning.
8. Identifying the proper ethical path is easy.
9. The Sarbanes-Oxley Act (SOX) does not require public companies to apply both accounting oversight and stringent internal controls.
10. A partnership is a business owned by two or more people.
11. A sole proprietorship is one or more individuals selling products or services for profit.
12. Accounting information is communicated to various parties through financial statements.
13. Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.
14. The business entity principle means that a business is accounted for separately from other business entities, including its owner or owners.
15. A sole proprietorship is a business owned by one or more persons.
16. Unlimited liability is an advantage of a sole proprietorship.
17. Objectivity means that financial information is supported by independent unbiased evidence.
18. The idea that a business will continue to operate until it can sell its assets to pay its creditors underlies the going-concern assumption.
19. The Securities and Exchange Commission (SEC) is the government group that establishes reporting requirements for companies that issue stock to the public.
20. The Securities and Exchange Commission (SEC) is the private group that sets both broad and specific accounting standards.
21. Investing activities are the acquiring and selling of resources that an organization uses to acquire and sell its products or services.
22. Owner financing refers to resources contributed by creditors or lenders.
23. Revenues are increases in equity from a company's earning activities.
24. Expenses decrease equity and are the costs of assets or services used to earn revenues.
25. Liabilities are the owner's claim on assets.
26. Revenues occur when expenses exceed assets.
27. Every business transaction leaves the accounting equation in balance.
28. An owner's investment in a business always creates an asset (cash), a liability (note payable), and owner's equity (investment.)
29. Net assets always increase when revenue is recorded.
30. Reebok's net income of $117 million and average assets of $1,400 million results in a return on assets of 8.36%.
31. Return on assets measures the effectiveness of an organization's ability to generate profit using its assets.
32. An income statement reports on investing and financing activities.
33. The balance sheet is based on the accounting equation.
34. Owner's contributions and withdrawals are reported on the income statement.
35. The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.
36. The income statement reports on operating activities at a point in time.
pksmfk
Mar 4, 2010, 07:27 AM
Choice
1. Accounting is an information and measurement system that:
A. Identifies business activities.
B. Records business activities.
C. Communicates business activities.
D. Helps people make better decisions.
E. All of these.
2. Internal users of accounting information include:
A. Shareholders.
B. Managers.
C. Lenders.
D. Suppliers.
E. Customers.
3. The operating functions of a business include:
A. Research and development.
B. Purchasing.
C. Marketing.
D. Distribution.
E. All of these.
4. The accounting guideline that requires financial statement information to be supported by independent, unbiased evidence other than someone's belief or opinion is the:
A. Business entity principle.
B. Monetary unit principle.
C. Going-concern principle.
D. Cost principle.
E. Objectivity principle.
5. The rules adopted by the accounting profession as guides in preparing financial statements are:
A. Comprised of both general and specific principles.
B. Known as generally accepted accounting principles.
C. Abbreviated as GAAP.
D. Intended to make information in financial statements relevant, reliable, and comparable.
E. All of these.
6. The committee that attempts to create more harmony among the accounting practices of different countries by identifying preferred practices and encouraging their worldwide acceptance is the:
A. AICPA.
B. FASB.
C. CAP.
D. SEC.
E. IASB.
7. If a parcel of land that was originally acquired for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land should be recorded in the purchaser's books at:
A. $95,000.
B. $137,000.
C. $138,500.
D. $140,000.
E. $150,000.
8. Generally accepted accounting principles:
A. Are based on long used accounting practices.
B. Are basic assumptions, concepts, and guidelines in preparing financial statements.
C. Are detailed rules used in reporting on business transactions and events.
D. Arise from the rulings of authoritative bodies.
E. All of these.
9. The question of when revenue should be recognized on the income statement (according to GAAP) is addressed by the:
A. Revenue recognition principle.
B. Going-concern principle.
C. Objectivity principle.
D. Business entity principle.
E. Cost principle.
10. On December 15, 2007, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2008. Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2008 and not 2007?
A. Monetary unit principle
B. Going-concern principle
C. Cost principle
D. Business entity principle
E. Revenue recognition principle
11. A limited partnership:
A. Includes a general partner with unlimited liability.
B. Is subject to double taxation.
C. Has owners called stockholders.
D. Is the same as a corporation.
E. May only have two partners.
12. According to generally accepted accounting principles, a company's balance sheet should show the company's assets at:
A. The cash equivalent value of what was given up or received.
B. The current market value of the asset received in all cases.
C. The cash paid only, even if something other than cash was given in the exchange.
D. The best estimate of a certified internal auditor.
E. The objective value to external users.
13. Revenue is properly recognized:
A. When the customer's order is received.
B. Only if the transaction creates an account receivable.
C. At the end of the accounting period.
D. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.
E. When cash from a sale is received.
14. If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land account transaction amount to handle the sale of the land in the seller's books is:
A. $85,000 increase
B. $85,000 decrease
C. $137,000 increase
D. $137,000 decrease
E. None of these
15. If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. At the time of the sale, assume that the seller still owed $30,000 to TrustOne Bank on the land that was purchased for $85,000. Immediately after the sale, the seller paid off the loan to TrustOne Bank. What is the effect of the sale and the payoff of the loan on the accounting equation?
A. Assets increase $52,000; owner's equity increases $22,000; liabilities decrease $30,000
B. Assets increase $52,000; owner's equity increases $30,000; liabilities decrease $30,000
C. Assets increase $22,000; owner's equity increases $52,000; liabilities decrease $30,000
D. Assets decrease $30,000; owner's equity decreases $30,000; liabilities decrease $30,000
E. Assets decrease $55,000; owner's equity decreases $55,000; liabilities decrease $30,000
16. An example of an operating activity is:
A. Paying wages.
B. Purchasing office equipment.
C. Borrowing money from a bank.
D. Selling stock.
E. Paying off a loan.
17. Operating activities:
A. Are the means organizations use to pay for resources like land, buildings and equipment.
B. Involve using resources to research, develop, purchase, produce, distribute and market products and services.
C. Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.
D. Are also called asset management.
E. Are also called strategic management.
18. The major activities of a business include:
A. Operating.
B. Financing.
C. Investing.
D. All of these.
19. An example of an investing activity is:
A. Paying wages of employees.
B. Withdrawals by the owner.
C. Purchase of land.
D. Selling inventory.
E. Contribution from owner.
20. If equity is $300,000 and liabilities are $192,000, then assets equal:
A. $108,000.
B. $192,000.
C. $300,000.
D. $492,000.
E. $792,000.
21. Gross increases in equity from a company's earnings activities are:
A. Assets.
B. Revenues.
C. Liabilities.
D. Owner's Equity.
E. Expenses.
22. Creditors' claims on the assets of a company are called:
A. Net losses.
B. Expenses.
C. Revenues.
D. Equity.
E. Liabilities.
23. The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:
A. Income statement equation.
B. Accounting equation.
C. Business equation.
D. Return on equity ratio.
E. Net income.
24. Revenues are:
A. The same as net income.
B. The excess of expenses over assets.
C. Resources owned or controlled by a company
D. The gross increase in equity from a company's earning activities.
E. The costs of assets or services used.
25. If assets are $99,000 and liabilities are $32,000, then equity equals:
A. $32,000.
B. $67,000.
C. $99,000.
D. $131,000.
E. $198,000.
26. The excess of expenses over revenues for a period is:
A. Net assets.
B. Equity.
C. Net loss.
D. Net income.
E. A liability.
27. Distributions by a business to its owners are called:
A. Withdrawals.
B. Expenses.
C. Assets.
D. Retained earnings.
E. Net Income.
28. The assets of a company total $700,000; the liabilities, $200,000. What are the claims of the owners?
A. $900,000.
B. $700,000.
C. $500,000.
D. $200,000.
E. It is impossible to determine unless the amount of this owners' investment is known.
29. On June 30 of the current year, the assets and liabilities of Phoenix Phildell are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of July 1 of the current year?
A. $8,300
B. $13,050
C. $20,500
D. $31,100
E. $40,400
30. Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?
A. Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.
B. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.
C. Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.
D. Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.
E. Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.
31. If the liabilities of a business increased $75,000 during a period and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have:
A. Decreased $105,000.
B. Decreased $45,000.
C. Increased $30,000.
D. Increased $45,000.
E. Increased $105,000.
32. If the assets of a business increased $89,000 during a period and its liabilities increased $67,000 during the same period, equity in the business must have:
A. Increased $22,000.
B. Decreased $22,000.
C. Increased $89,000.
D. Decreased $156,000.
E. Increased $156,000.
33. If assets are $365,000 and equity is $120,000, then liabilities are:
A. $120,000.
B. $245,000.
C. $365,000.
D. $485,000.
E. $610,000.
34. FastForward has net income of $18,955, and assets at the beginning of the year of $200,000. Assets at the end of the year total $246,000. Compute its return on assets.
A. 7.7%.
B. 8.5%.
C. 9.5%.
D. 11.8%.
E. 13.0%.
35. Risk is:
A. Net income divided by average total assets.
B. The reward for investment.
C. The uncertainty about the expected return to be earned.
D. Unrelated to expected return.
E. Derived from the idea of getting something back from an investment.
36. The statement of cash flows reports information on:
A. Revenue activities.
B. Operating activities.
C. Financing activities.
D. Investing activities.
E. B, C, and D.
37. 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):
A. Balance sheet.
B. Income statement.
C. Statement of cash flows.
D. Statement of owner's equity.
E. Financial Status Statement.
38. Cash investments by owners are listed on which of the following statements?
A. Balance sheet.
B. Income statement.
C. Statement of owner's equity.
D. Statement of cash flows.
E. Both C and D.
39. Use the following information as of December 31 to determine equity.
A. $57,000.
B. $141,000.
C. $297,000.
D. $438,000.
E. $579,000.
40. A company acquires equipment for $75,000 cash. This represents a(n)
A. Operating activity.
B. Investing activity.
C. Financing activity.
D. Revenue activity.
E. Expense activity.
41. Flash has beginning equity of $257,000, net income of $51,000, withdrawals of $40,000 and investments by owners of $6,000. Its ending equity is:
A. $223,000.
B. $240,000.
C. $268,000.
D. $274,000.
E. $208,000.
42. Rent expense that is paid with cash appears on which of the following statements?
A. Balance sheet.
B. Income statement.
C. Statement of owner's equity.
D. Statement of cash flows.
E. Both B and D.
43. Fees earned (but not yet received in cash) by a business in exchange for services it provided appear on which of the following statements?
A. Balance sheet.
B. Income statement.
C. Statement of owner's equity.
D. Statement of cash flows.
E. Both A and B.