(Test Bank) Accounting: What the Numbers Mean

Marshall, 13

Business

Test Bank

13th Edition

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Author(s): Marshall

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Version 1 1 CHAPTER 1 MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1) Which of the following entities wouldnot require accounting information pertaining to their economic activities? A) Social clubs B) Not-for-profit entities C) State governments D) Small businesses E) All of these entities require accounting information. 2) The authoritative financial accounting standards-setting body in the United States is presently the: A) Public Company Accounting Oversights Board (PCAOB) B) Financial Accounting Standards Board (FASB) C) Accounting Principles Board (APB) D) Securities and Exchange Commission (SEC) E) International Accounting Standards Board (IASB) 3) Which of the following statements about the Financial Accounting Standards Board is correct? A) The FASB follows a due process procedure that permits input from interested parties before an Accounting Standards Update (ASU) is issued. B) The FASB is controlled by the American Institute of CPAs. C) The FASB is an agency of the Federal government. D) The FASB has the authority to fine a noncompliant firm. 4) Major classifications of accounting activity wouldnot include:Version 1 2 A) financial accounting, internal auditing, public accounting. B) internal auditing, governmental accounting, managerial accounting. C) financial accounting, national accounting, cost accounting. D) auditing, income tax accounting, governmental accounting. 5) Which of the following isnot an example of a decision or informed judgment that a potential investor would make from accounting information? A) A forecast of dividends B) Assessment of risk that a company may have more debt than it can repay if the economy enters a recession C) Future profitability based on past profitability D) Probability of success of a new product development 6) Which of the following isnot an example of a decision or informed judgment that a potential employee could make from accounting information? A) The extent of the company's commitment to a research program B) Personnel turnover statistics (i.e., hiring and terminations) C) Probability of the company's ability to make profit sharing plan contributions in the future D) Assessment of the risk that the company may become bankrupt in the near future 7) Which of the following are qualified to express an auditor's opinion about an entity's financial statements? A) A Comptroller B) A Certified Management Accountant C) A Certified Internal Auditor D) A Certified Public Accountant Version 1 3 8) Which classification of accounting is most concerned with the use of economic and financial information to plan and control many of the activities of the entity? A) Financial accounting B) Auditing / Public accounting C) Managerial accounting D) Income tax accounting 9) An unqualified auditors' opinion about an entity's financial statements: A) is a clean bill of health. B) means that all of the entity's transactions during the audited period were checked out. C) guarantees that the entity was not involved in or the victim of any fraudulent activities during the audited period. D) states that they are presented in conformity with accounting principles generally accepted in the United States. 10) Cost accounting is a subset of which of the following? A) Cost analysis B) Managerial accounting C) Internal auditing D) Public auditing 11) The officer of a corporation responsible for the firm's published financial statements would be most concerned about pronouncements of the: A) FASB. B) AICPA. C) GASB. D) SEC. E) IRS. Version 1 4 12) Which of the following isnot a characteristic or limitation of the kind of information that financial reporting by business enterprises can provide? A) The information results in approximate, rather than exact, measures. B) The information largely reflects the financial effects of transactions that have already taken place. C) The information is provided and used at a cost. D) All of the answers are characteristics or limitations of the kind of information that financial reporting by business enterprises can provide. 13) The ethical concept of independence means that an accountant employed: A) by a corporation cannot prepare financial statements for use by the company's bank. B) by one company cannot work part-time for another company. C) by an auditing firm cannot own any stock in the company being audited. D) by one company cannot accept a job with another company in the same industry. 14) The objectives of financial reporting for nonbusiness enterprises: A) have more of an internal utilization rather than external reporting focus. B) do not give consideration to the cost of providing information. C) are exactly the same as those for business enterprises. D) focus on providing information for resource providers, rather than investors. 15) The ethical concept of integrity means that an individual must: A) attempt to be honest and forthright in dealings and communications with others. B) sign a pledge to abide by all laws and regulations. C) report to a supervisor any violation of the code of conduct of her company that is observed. D) read, understand, and agree to follow all provisions of her employer's code of conduct. Version 1 5 16) Which of the following is an objective of financial reporting by business enterprises? A) Financial reporting should provide assurance that all liabilities of business enterprises will be paid. B) The primary focus of financial reporting is information about the assets of the entity. C) Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and changes in those resources and claims to them. D) Financial reporting should show the timing and amount of future cash dividends to potential investors. 17) Which of the following isnot true about the International Accounting Standards Board (IASB)? A) The IASB is the authoritative accounting standards setting body for all member nations of the United Nations. B) The IASB has been working with the FASB in recent years to attempt to achieve convergence of International Financial Reporting Standards (IFRS) and U.S. GAAP. C) The goal of the IASB is to develop a single set of high quality, understandable, enforceable, and globally accepted financial reporting standards based upon clearly articulated principles. D) The IASB’s approach to accounting standard setting leans more toward defining broad principles that companies must follow, as opposed to the FASB’s approach which tends to define detailed rules that companies must follow. 18) The Public Company Accounting Oversight Board (PCAOB) has the authority to set and enforce standards for public companies related to: A) Auditing. B) Attestation. C) Quality control. D) Ethics (including independence). E) All of the answers are correct. Version 1 6 19) Accounting can be defined as: A) the process of preparing and auditing an entity's financial statements. B) the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments. C) the process of communicating the financial results of corporate activities to investors and regulatory bodies. D) the process of planning, controlling, and evaluating financial performance, and supporting the management decision-making process. 20) Over the years, the Securities and Exchange Commission (SEC) has delegated its statutory authority to establish accounting standards for publicly traded companies in the United States. This delegated authority impacted which of the following organizations? A) The Committee on Accounting Procedures of the American Institute of Accountants. B) The Accounting Principles Board (APB). C) The Financial Accounting Standards Board (FASB). D) None of these organizations were ever delegated authority by the SEC to establish accounting standards in the United States. E) Each of these organizations were at one time or another delegated authority by the SEC to establish accounting standards in the United States. 21) Which of the following wasnot one of the reasons for the FASB's decision to undertake the Conceptual Framework project? A) To provide a structure or framework of financial accounting concepts. B) To describe concepts that will underlie guidance on future accounting practices and in due course serve as a basis for evaluating existing guidance and practices. C) To provide detailed, industry-specific authoritative guidance for the accounting and financial reporting of complex business transactions. D) To facilitate the FASB's efforts in developing accounting and reporting guidance by providing a common foundation and basic reasoning on which to consider merits of alternatives. 22) The first formal accounting standard setting activity in the United States began:Version 1 7 A) during the Industrial Revolution in the mid-19th century in response to the need to protect the financial interests of absentee owners of corporations. B) during the late 19th century when British accounting standards were imposed on U.S. publicly-traded companies wishing to attract British capital. C) in the early 1930s when the American Accounting Institute (AIA) and the New York Stock Exchange (NYSE) agreed on five broad principles of accounting. D) in the early 1930s when the Securities and Exchange Commission (SEC) delegated its statutory authority to regulate U.S. accounting standards to the Financial Accounting Standards Board (FASB). 23) Accrual accounting: A) eliminates the need to record most of a company’s liabilities. B) accounts for the economic effects of transactions when cash receipts or cash payments take place rather than when the resulting revenues are earned or expenses are incurred. C) is used for financial reporting purposes because it measures of a company’s past earnings performance more accurately than does cash basis accounting. D) rarely if ever involves the use of estimates. 24) Financial reporting: A) is designed primarily for internal planning, control, and decision-making purposes. B) includes detailed notes and other disclosures about a company’s past performance. C) is designed primarily to meet the needs of banks, taxing authorities, and other Governmental regulatory bodies such as the SEC. D) is future oriented in nature, with detailed disclosures about a company’s operating plans to allow investors to make accurate earnings projections. Version 1 8 Answer Key Test name: Chap 01_13e_Marshall 1) E 2) B 3) A 4) C 5) D 6) B 7) D 8) C 9) D 10) B 11) A 12) D 13) C 14) D 15) A 16) C 17) A 18) E 19) B 20) E 21) C 22) C 23) C 24) B Version 1 1 CHAPTER 2 MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1) Which of the following isnot a transaction to be recorded in the accounting records of a company? A) Investment of cash by the owners B) Sale of product to customers C) Receipt of a plaque recognizing the company's encouragement of employee participation in the United Way fund drive D) Receipt of services from a "quick-print" shop in exchange for the promise to provide advertising design services of equivalent value 2) The balance sheet might also be called: A) Statement of Financial Position. B) Statement of Assets. C) Statement of Changes in Financial Position. D) Statement of Equity. 3) Transactions are summarized in: A) the notes to the financial statements. B) the independent auditor's report. C) the company's accounts. D) the Accounting Standards Updates (ASUs). 4) A fiscal year:Version 1 2 A) is always the same as the calendar year. B) is frequently selected based on the company's operating cycle. C) must always end on the same date each year. D) must end on the last day of a month. 5) Which of the following is not a principal form of business organization? A) Partnership B) Sole proprietorship C) Limited unregistered business D) Corporation 6) The time frame associated with a balance sheet is: A) a point in time in the past. B) a one-year past period of time. C) a single date in the future. D) a function of the information included in it. 7) Current U.S. Generally Accepted Accounting Principles and auditing standards require the financial statements of an entity for the reporting period to include: A) earnings and gross receipts of cash for the period. B) projected earnings for the subsequent period. C) financial position at the end of the period. D) current fair values of all assets at the end of the period. 8) The balance sheet equation can be represented by:Version 1 3 A) Assets = Liabilities + Stockholders' Equity B) Assets − Liabilities = Stockholders' Equity C) Net Assets = Stockholders' Equity D) All of the answers are correct. 9) Stockholders' equity refers to which of the following? A) A listing of the organization's assets and liabilities B) The ownership rights of the stockholders of the company C) Probable future sacrifices of economic benefits D) The amount of resources controlled by the company 10) Accumulated depreciation on a balance sheet: A) is part of stockholders' equity. B) represents the portion of the cost of an asset that is assumed to have been "used up" in the process of operating the business. C) represents cash that will be used to replace worn out equipment. D) recognizes the economic loss in value of an asset because of its age or use. 11) The distinction between a current asset and other assets is based on: A) how long the asset has been owned. B) amounts that will be paid to other entities within a year. C) the ability to determine the current fair value of the asset. D) when the asset is expected to be converted to cash or used to benefit the entity. 12) The income statement shows amounts for:Version 1 4 A) revenues, expenses, losses, and liabilities. B) revenues, expenses, gains, and fair value per share. C) revenues, assets, gains, and losses. D) revenues, gains, expenses, and losses. 13) The time frame associated with an income statement is: A) a point in time in the past. B) a past period of time. C) a future period of time. D) a function of the information included in it. 14) Revenues are: A) cash receipts. B) increases in net assets from selling products or providing services. C) increases in net assets from occasional sales of equipment. D) increases in net assets from selling common stock. 15) Expenses are: A) cash disbursements. B) decreases in net assets from uninsured accidents. C) decreases in net assets from dividends to stockholders. D) decreases in net assets resulting from usual operating activities. 16) The purpose of the income statement is to show the:Version 1 5 A) change in the fair value of the assets from the prior income statement. B) market value per share of stock at the date of the statement. C) revenues collected during the period covered by the statement. D) net income or net loss for the period covered by the statement. 17) The Statement of Changes in Stockholders' Equity shows: A) the change in cash during a year. B) revenues, expenses, and liabilities for the period. C) net income and dividends for the period. D) paid-in capital and long-term debt at the end of the period. 18) Paid-in Capital represents: A) earnings retained for use in the business. B) the amount invested in the company by the stockholders. C) fair value of the company's common stock. D) net assets of the company at the date of the statement. 19) Retained Earnings represents: A) the amount invested in the company by the stockholders. B) cash that is available for dividends. C) cumulative net income that has not been distributed to stockholders as dividends. D) par value of common stock outstanding. 20) Additional paid-in capital represents:Version 1 6 A) the difference between the total amounts invested by the stockholders and the par or stated value of the stock. B) distributions of earnings that have been made to the stockholders. C) distributions of earnings that have not been made to the stockholders. D) the summation of the total amount invested by the stockholders and the par or stated value of the stock. 21) The Statement of Cash Flows: A) shows how cash changed during the period. B) is an optional financial statement. C) shows the change in the fair value of the company's common stock during the period. D) shows the dividends that will be paid in the future. 22) On January 31, a company's balance sheet showed assets of $3,200 and liabilities of $800. Stockholders' equity at January 31 was: A) $2,400. B) $4,000. C) $1,600. D) $800. 23) On January 31, a company's balance sheet showednet assets of $2,600 and liabilities of $700. Stockholders' equity on January 31 was: A) $1,900. B) $2,600. C) $3,300. D) $700. Version 1 7 24) At the end of the year, retained earnings totaled $3,100. During the year, net income was $750, and dividends of $350 were declared and paid. Retained earnings at the beginning of the year totaled: A) $3,500. B) $2,350. C) $1,900. D) $2,700. 25) The balance sheet shows the following accounts and amounts: Cash $13,000; Short-term Debt $21,000; Buildings and Equipment $420,000; Inventory, $44,000; Notes Payable $60,000; Accumulated Depreciation $110,000; Common Stock $80,000; Accounts Receivable $38,000; Retained Earnings $237,000; Accounts Payable $17,000. Total assets on the balance sheet are: A) $367,000. B) $405,000. C) $515,000. D) $625,000. 26) The balance sheet shows the following accounts and amounts: Cash $13,000; Short-term Debt $21,000; Buildings and Equipment $420,000; Inventory, $44,000; Notes Payable $60,000; Accumulated Depreciation $110,000; Common Stock $80,000; Accounts Receivable $38,000; Retained Earnings $237,000; Accounts Payable $17,000. Total liabilities on the balance sheet are: A) $77,000. B) $98,000. C) $178,000. D) $208,000.