(Test Bank) Financial And Managerial Accounting

Weygandt, Kimmel, Kieso, 3

Business

Test Bank

3rd Edition

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Test Bank for Financial And Managerial Accounting, The downloadable file consists of 2042 pages, and the total size of the file is 9.9 MB. Purchase now only for highly discounted price.

Author(s): Weygandt, Kimmel, Kieso

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Test Bank for Financial and Managerial Accounting, 3e Jerry Weygandt, Paul Kimmel, Donald Kieso (All Chapters) CHAPTER 1 ACCOUNTING IN ACTION SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT True -False Statements 1. 1 K 10. 1 K 19. 2 K 28. 5 C sg37. 1 K 2. 1 K 11. 1 K 20. 2 C 29. 5 C sg38. 2 K 3. 1 C 12. 2 K 21. 3 K 30. 5 C sg39. 2 C 4. 1 K 13. 2 K 22. 3 K 31. 5 K sg40. 2 K 5. 1 K 14. 2 K 23. 3 K 32. 5 K sg41. 3 K 6. 1 C 15. 2 K 24. 4 K a33. 6 K sg42. 4 K 7. 1 K 16. 2 K 25. 4 K a34. 6 K sg43. 5 K 8. 1 C 17. 2 K 26. 4 K a35. 6 K 9. 1 K 18. 2 K 27. 4 K sg36. 1 K Multiple Choice Questions 44. 1 K 74. 2 C 104. 3 K 134. 5 K a164. 6 C 45. 1 K 75. 2 K 105. 3 C 135. 5 K sg165. 1 K 46. 1 K 76. 2 K 106. 3 K 136. 5 AP st166. 1 K 47. 1 C 77. 2 C 107. 3 C 137. 5 AP st167. 1 K 48. 1 K 78. 2 K 108. 3 AP 138. 5 AP sg168. 1 K 49. 1 K 79. 2 K 109. 3 AP 139. 5 K st169. 1 K 50. 1 K 80. 2 K 110. 3 AP 140. 5 C sg170. 2 K 51. 1 K 81. 2 K 111. 3 AP 141. 5 K st171. 2 K 52. 1 K 82. 2 K 112. 3 AP 142. 5 K sg172. 2 K 53. 1 K 83. 2 K 113. 3 K 143. 5 AP sg173. 3 K 54. 1 C 84. 2 C 114. 3 K 144. 5 AP sg174. 4 C 55. 1 C 85. 2 C 115. 3 K 145. 5 AP sg175. 4 C 56. 1 C 86. 2 K 116. 3 K 146. 5 AP sg176. 5 K 57. 1 C 87. 2 K 117. 4 C 147. 5 AP sg177. 5 K 58. 1 C 88. 2 C 118. 4 AP 148. 5 AP 178. 7 K 59. 1 C 89. 2 K 119. 4 C 149. 5 AP 179. 7 K 60. 1 K 90. 2 K 120. 4 C 150. 5 AP 180. 7 K 61. 1 K 91. 2 K 121. 4 C 151. 5 AP 181. 7 K 62. 1 C 92. 2 K 122. 4 C 152. 5 AP 182. 7 K 63. 2 K 93. 3 K 123. 4 C 153. 5 AP 183. 7 K 64. 2 C 94. 3 K 124. 4 C 154. 5 AP 184. 7 K 65. 2 K 95. 3 K 125. 4 K 155. 5 AP 185. 7 K 66. 2 K 96. 3 C 126. 4 C 156. 5 AN 186. 7 K 67. 2 K 97. 3 K 127. 4 C 157. 5 AN 187. 7 K 68. 2 K 98. 3 K 128. 4 C 158. 5 AN 188. 7 K 69. 2 K 99. 3 C 129. 4 AN 159. 5 AN 189. 7 K 70. 2 K 100. 3 K 130. 4 C 160. 5 AN 190. 7 K 71. 2 C 101. 3 K 131. 5 C a161. 6 K 191. 7 K 72. 2 K 102. 3 K 132. 5 C a162. 6 K 73. 2 K 103. 3 K 133. 5 K a163. 6 K sg This question also appears in the Study Guide. st This question also appears in a self -test at the student companion website. a This question covers a topic in an appendix to the chapter. Test Bank for Financial and Managerial Accounting, Third Edition FOR INSTRUCTOR USE ONLY 1 - 2 SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY Brief Exercises 192. 1 C 195. 3 AP 198. 4 C 201. 5 AP 193. 3 K 196. 3 AP 199. 5 AP 202. 5 AP 194. 3 K 197. 3 C 200. 6. 5 C Exercises 203. 1,2 K 211. 3 C 219. 4 C 227. 5 AP 235. 5 AN 204. 3 C 212. 3,4 C 220. 4 C 228. 5 AP 236. 5 C 205. 3 C 213. 3,4 C 221. 4 AP 229. 5 AP 237. 5 AP 206. 3 AP 214. 3,4 AP 222. 4 C 230. 5 AN 238. 5 AP 207. 3 C 215. 4 AP 223. 4 C 231. 5 AP 239. 5 AP 208. 3 AP 216. 4 AP 224. 4 C 232. 5 AP 209. 3 AN 217. 4 C 225. 4 C 233. 5 C 210. 3 AN 218. 4 AN 226. 4 C 234. 5 AP Completion Statements 240. 1 K 242. 1 K 244. 2 K 246. 2 K 248. 3 K 241. 1 K 243. 1 K 245. 2 K 247. 3 K 249. 5 K Matching: Q250 , Short Answer: Q251 -256 SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE Item Type Item Type Item Type Item Type Item Type Item Type Item Type Learning Objective 1 1. TF 8. TF 45. MC 52. MC 59. MC 168. MC 243. C 2. TF 9. TF 46. MC 53. MC 60. MC 169. MC 3. TF 10. TF 47. MC 54. MC 61. MC 192. BE 4. TF 11. TF 48. MC 55. MC 62. MC 203. Ex 5. TF 36. TF 49. MC 56. MC 165. MC 240. C 6. TF 37. TF 50. MC 57. MC 166. MC 241. C 7. TF 44. MC 51. MC 58. MC 167. MC 242. C Learning Objective 2 12. TF 19. TF 65. MC 72. MC 79. MC 86. MC 170. MC 13. TF 20. TF 66. MC 73. MC 80. MC 87. MC 171. MC 14. TF 38. TF 67. MC 74. MC 81. MC 88. MC 172. MC 15. TF 39. TF 68. MC 75. MC 82. MC 89. MC 203. Ex 16. TF 40. TF 69. MC 76. MC 83. MC 90. MC 244. C 17. TF 63. MC 70. MC 77. MC 84. MC 91. MC 245. C 18. TF 64. MC 71. MC 78. MC 85. MC 92. MC 246. C Accounting in A ction FOR INSTRUCTOR USE ONLY 1 - 3 SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE Learning Objective 3 21. TF 96. MC 103. MC 110. MC 173. MC 205. Ex 212. Ex 22. TF 97. MC 104. MC 111. MC 193. BE 206. Ex 213. Ex 23. TF 98. MC 105. MC 112. MC 194. BE 207. Ex 214. Ex 41. TF 99. MC 106. MC 113. MC 195. BE 208. Ex 247. C 93. MC 100. MC 107. MC 114. MC 196. BE 209. Ex 248. C 94. MC 101. MC 108. MC 115. MC 197. BE 210. Ex 95. MC 102. MC 109. MC 116. MC 204. Ex 211. Ex Learning Objective 4 24. TF 118. MC 124. MC 130. MC 214. Ex 220. Ex 226. Ex 25. TF 119. MC 125. MC 174. MC 215. Ex 221. Ex 26. TF 120. MC 126. MC 175. MC 216. Ex 222. Ex 27. TF 121. MC 127. MC 198. BE 217. Ex 223. Ex 42. TF 122. MC 128. MC 212. Ex 218. Ex 224. Ex 117. MC 123. MC 129. MC 213. Ex 219. Ex 225. Ex Learning Objective 5 28. TF 133. MC 141. MC 149. MC 157. MC 201. BE 233. Ex 29. TF 134. MC 142. MC 150. MC 158. MC 202. BE 234. Ex 30. TF 135. MC 143. MC 151. MC 159. MC 227. Ex 235. Ex 31. TF 136. MC 144. MC 152. MC 160. MC 228. Ex 236. Ex 32. TF 137. MC 145. MC 153. MC 176. MC 229. Ex 237. Ex 43. TF 138. MC 146. MC 154. MC 177. MC 230. Ex 238. Ex 131. MC 139. MC 147. MC 155. MC 199. BE 231. Ex 239. Ex 132. MC 140. MC 148. MC 156. MC 200. BE 232. Ex 249. C Learning Objective 6 a33. TF a35. TF a162. MC a164. MC a34. TF a161. MC a163. MC Learning Objective 7 178. MC 180. MC 182. MC 184. MC 186. MC 188. MC 190. MC 179. MC 181. MC 183. MC 185. MC 187. MC 189. MC 191. MC Note: TF = True-False BE = Brief Exercise C = Completion MC = Multiple Choice Ex = Exercise Test Bank for Financial and Managerial Accounting, Third Edition FOR INSTRUCTOR USE ONLY 1 - 4 CHAPTER LEARNING OBJECTIVES 1. Identify the activities and users asso ciated with accounting . Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. The major users and uses of accounting are as follows: (a) Management uses accounting informa tion to plan, organize , and run the business. (b) Investors (owners) decide whether to buy, hold, or sell their financial interests on the basis of accounting data . (c) Creditors (suppliers and bankers) evaluat e the risks of granting credit or lending mone y on the basis of accounting information . Other group s that use accounting information are taxing authorities, regulatory agencies, customers, and labor unions. 2. Explain the building blocks of accounting: ethics, principles, and assumptions . Ethics are the standards of conduct by which actions are judged as right or wrong. Effective financial reporting depends on sound ethical behavior. Generally accepted accounting principles are a common set of standards used by accountants. The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money. The economic entity assumption requires that the activities of each economic entity be kept separate from the activities of its owners and other economic entities. 3. State the accounting equation , and define its components . The basic accounting equation is: Assets = Liabilities + Stockholders' Equity Assets are resources owned by a business. Liabilities are creditorship claims on total assets. Stockholders' equity is the ownership claim on total assets. The expanded accounting equation is: Assets = Liabilities + Common Stock + Revenues − Expenses − Dividends Common stock is affected when the company issues new shares of stock in exch ange for cash. Revenues are increases in assets resulting from income -earning activities. Expenses are the costs of assets consumed or services used in the process of earning revenue. Dividends are payments the company makes to its stockholders. 4. Analyze the effect s of business transactions on the accounting equation . Each business transaction must have a dual effect on the accounting equation. For example, if an individual asset increase s, there must be a corresponding (1) decrease in another asset, or ( 2) increase in a specific liability, or (3) increase in stockholders' equity. 5. Describe the four financial statements and how they are prepared . An income statement presents the revenues and expenses , and resulting net income or net loss, for a specifi c period of time. A retained earnings statement summarizes the changes in retained earnings for a specific period of time. A balance sheet reports the assets, liabilities, and stockholders' equity at a specific date. A statement of cash flows summarizes info rmation about the cash inflows (receipts) and outflows (payments) for a specific period of time. a6. Explain the career opportunities in accounting . Accounting offers many different jobs in fields such as public and private accounting, government al account ing, and forensic accounting. Accounting is a popular major because there are many different types of jobs, with unlimited potential for career advancement. Accounting in A ction FOR INSTRUCTOR USE ONLY 1 - 5 TRUE -FALSE STATEMENTS 1. Owners of business firms are the only people who need accounting informa tion. Ans: F LO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 2. Transactions that can be measured in dollars and cents are recorded in the financial information system. Ans: T LO1 BT: K Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 3. The hiring of a new company president is an economic event recorded by the financial information system. Ans: F LO1 BT: C Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 4. Management of a business enterprise is the major external user of information. Ans: F LO1 BT: K Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reportin g 5. Accounting communicates financial information about a business enterprise to both internal and external users. Ans: T LO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 6. Accounting information is used only by external users with a financial interest in a business enterprise. Ans: F LO1 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 7. Financial statements are the major means of communicating accounting information to interested parties. Ans: T LO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 8. Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process. Ans: F LO1 BT: C Difficulty: Easy TO T: .5 min . AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 9. The origins of accounting are attributed to Luca Pacioli, a famous mathematician. Ans: T LO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflecti ve Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 10. The study of accounting is not useful for a business career unless your career objective is to become an accountant. Ans: F LO 1 BT: K Difficulty: Easy TOT: .5 min. AACSB: R eflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 11. A working knowledge of accounting is not relevant to a lawyer or an architect. Ans: F LO 1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB : Critical Thinking AICPA FN: Reporting 12. A partnership must have more than one owner. Ans: T LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN : Reporting 13. The economic ent ity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities. Ans: T LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Cri tical Thinking AICPA FN: Reporting 14. The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records. Ans: T LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflec tive Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Test Bank for Financial and Managerial Accounting, Third Edition FOR INSTRUCTOR USE ONLY 1 - 6 15. Accountants rely on a fundamental business concept —ethical behavior —in reporting financial information. Ans: T LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective T hinking AICPA BB: Critical Thinking AICPA FN: Reporting 16. The primary accounting standard -setting body in the United States is the Internationa l Accounting Standards Board. Ans: F LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflec tive Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 17. The Financial Accounting Standards Board is a part of the Securities and Exchange Commission. Ans: F LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 18. The Securities and Exchange Commission overse es U.S. financial markets and accounting s tandard -setting bodies . Ans: T LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 19. The cost and fair value of an asset are the same at the time of acquisition and in all subsequent periods. Ans: F LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking A ICPA BB: Critical Thinking AICPA FN: Reporting 20. 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. Ans: T LO2 BT: C Difficulty; Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 21. In order to possess future service potential, an asset must have physical substance. Ans: F LO3 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 22. Owners' claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses. Ans: F LO3 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 23. The basic accounting equation states that Assets = Liabilities. Ans: F LO3 BT: K Difficulty: Easy TO T: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 24. Accountants record both internal and external transactions. Ans: T LO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 25. Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company. Ans: F LO4 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 26. The purchase of store equipment for cash reduces assets and stockholders’ equity by an equal amount. Ans: F LO4 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflect ive Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 27. The purchase of office equipment on credit increases total assets and total liabilities. Ans: T LO4 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 28. 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. Ans: T LO5 BT: K Difficulty: Easy TOT: .5 m in. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Accounting in A ction FOR INSTRUCTOR USE ONLY 1 - 7 29. Net income for the period is determined by subtracting total expenses and drawings from total revenues. Ans: F LO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 30. The income statement is sometime s referred to as the statement of operations. Ans: T LO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 31. A balance sheet reports the assets and liabilities of a company for a specific period of time. Ans: F LO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 32. The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet. Ans: T LO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting a33. The study of accounting will be useful only if a student is interested in working for a profit - oriented business firm. Ans: F LO 6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinkin g AICPA BB: Critical Thinking AICPA FN: Reporting a34. Private accountants are accountants who are not employees of business enterprises. Ans: F LO 6 BT:K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Th inking AICPA FN: Reporting a35. Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs. Ans: T LO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICP A BB: Critical Thinking AICPA FN: Reporting 36. Identifying is the process of keeping a chronological diary of events measured in dollars and cents. Ans: F LO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Cr itical Thinking AICPA FN: Reporting 37. Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation. Ans: F LO1 BT: K Difficulty; Easy TOT: .5 min. AACS B: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 38. Accountants do not have to worry about issues of ethics. Ans: F LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Ethics AICPA BB: Critical Thinking AICPA FN : Reporting 39. At the time an asset is acquired, cost and fair value should be the same. Ans: T LO2 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 40. The monetary unit assumption requires that all dollar amounts be rounded to the nearest dollar. Ans: F LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 41. The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets. Ans: T LO3 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 42. External transact ions involve economic events between the company and some other enterprise or party. Ans: T LO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 43. In the retained earnings statement, revenues are listed first, followed by expenses, and net income (or net loss). Ans: F LO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Test Bank for Financial and Managerial Accounting, Third Edition FOR INSTRUCTOR USE ONLY 1 - 8 Answers to True -False Statements Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 1. F 8. F 15. T 22. F 29. F 36. F 43. F 2. T 9. T 16. F 23. F 30. T 37. F 3. F 10. F 17. F 24. T 31. F 38. F 4. F 11. F 18. T 25. F 32. T 39. T 5. T 12. T 19. F 26. F 33. F 40. F 6. F 13. T 20. T 27. T 34. F 41. T 7. T 14. T 21. F 28. T 35. T 42. T MULTIPLE CHOICE QUESTIONS 44. Accountants refer to an economic event as a a. purchase. b. sale. c. transaction. d. change in ownership. Ans: c LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reportin g 45. The starting point of the accounting process is a. communicating information to users . b. identifying economic events . c. recording ec onomic events . d. None of these answers are correct . Ans: b LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 46. Communication of economic events is the part of the accoun ting process that involves a. identifying economic events. b. quantifying transactions into dollars and cents. c. preparing accounting reports. d. recording and classifying information. Ans: c LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Ref lective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 47. Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction? a. The appointment of a new CPA firm to perform an audit. b. The purchase of a new computer. c. The sale of store equipment. d. Payment of income taxes. Ans: a LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 48. Interpretation of rep orted information involves each of the following except a. limitations of reported data . b. meaning of reported data . c. uses of reported data . d. All of these choices are correct . Ans: d LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflectiv e Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Accounting in A ction FOR INSTRUCTOR USE ONLY 1 - 9 49. The accounting process involves all of the following except a. identifying economic transactions that are relevant to the business. b. communicating financial information to users by pr eparing financial reports. c. recording non -quantifiable economic events. d. analyzing and interpreting financial reports. Ans: c LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Repo rting 50. The accounting process is correctly sequenced as a. identification, communication, recording. b. recording, communication, identification. c. identification, recording, communication. d. communication, recording, identification. Ans: c LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 51. Which of the following techniques are not used by accountants to interpret and report financial information? a. Graphs . b. Special memos for each class of external users . c. Charts . d. Ratios . Ans: b LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 52. Accounting consists of three basic activitie s which are related to economic events of an organization. These include a. identifying, recording, and communicating b. identifying, calculating, and responding c. classifying, numbering, and reporting d. issuing, reporting, and classifying Ans: a LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 53. All of the following statements are correct except a. Good decision -making depends on good information. b. A vital element in communicating economic events is the accountant's ability to analyze and interpret reported information. c. The origins of accounting are generally attributed to Socrates, a classical Greek philosopher, who promoted accounting as a social contract. d. The information that a user of financial information needs depends upon the kinds of decisions the user makes. Ans: c LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 54. Which of the following would not be considered an internal user of account ing data for the GHI Company? a. President of the company . b. Production manager . c. Merchandise inventory clerk . d. President of the employees' labor union . Ans: d LO1 BT: C Dif ficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Test Bank for Financial and Managerial Accounting, Third Edition FOR INSTRUCTOR USE ONLY 1 - 10 55. Which of the following would not be considered an external use r of accounting data for the GHI Company? a. Internal Revenue Service Age nt. b. Management . c. Creditors . d. Customers . Ans: b LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 56. Which of the following would not be considered internal users of accounting data for a company? a. The president of a company . b. The controller of a company . c. Creditors of a company . d. Salesmen of the company . Ans: c LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 57. Which of the following is an external user of accounting information? a. Labor unions . b. Finance direct ors. c. Company office rs. d. Managers . Ans: a LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflecti ve Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 58. Which one of the following is not an external user of accounting information ? a. Regulatory agencies . b. Customers . c. Investors . d. All of these are external users . Ans: d LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 59. Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process? a. Identification . b. Communication . c. Recording . d. Analysis . Ans: c LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 60. The origins of accounting are generally attributed to the work o f a. Christopher Columbus. b. Abner Doubleday. c. Luca Pacioli. d. Leonardo da Vinci. Ans: c LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Accounting in A ction FOR INSTRUCTOR USE ONLY 1 - 11 61. Financial accounting pro vides economic and financial information for all of the following except a. creditors. b. investors. c. managers. d. other external users. Ans: c LO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 62. The final step in solving an ethical dilemma is to a. identify and analyze the principal elements in the situation. b. recognize an ethical situation. c. identify the alternatives and weigh the impact of each alternative on stak eholders. d. recognize the ethical issues involved. Ans: c LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 63. The first step in solving an ethical dilemma is to a. ident ify and analyze the principal elements in the situation. b. identify the alternatives. c. recognize an ethical situation and the ethical issues involved. d. weigh the impact of each alternative on various stakeholders. Ans: c LO2 BT: K Difficulty: E asy TOT: 1.0 min. AACSB: Ethics AICPA BB: Critical Thinking AICPA FN: Reporting 64. Ethics are the standards of conduct by which one's actions are judged as a. right or wrong. b. honest or dishonest. c. fair or unfair. d. All of these answers ar e correct . Ans: d LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Ethics AICPA BB: Critical Thinking AICPA FN: Reporting 65. All of the following are steps in analyzing ethics cases in financial reporting except a. identify and analyze th e principle elements in the situation. b. contact law enforcement regarding any violations of corporate ethics codes c. identify the alternatives and weigh the impact of each alternative on various stakeholders. d. recognize an ethical situation and the et hical issues involved. Ans: b LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 66. In order to increase comparability, in recent years, the FASB and IASB have made efforts to reduce the differences between U.S.GAAP and IFRS through a process known as a. convergence b. monetary unit assumption c. the cost principle d. the fair value principle Ans: a LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinki ng AICPA BB: Critical Thinking AICPA FN: Reporting Test Bank for Financial and Managerial Accounting, Third Edition FOR INSTRUCTOR USE ONLY 1 - 12 67. Martin Corporation purchased land in 2010 for $290,000. In 2018 , it purchased a nearly identical parcel of land for $460,000. In its 2018 balance sheet, Martin valued these two parcels of land at a combined value of $920,000. By reporting the land in this manner, Martin Corp. has violated the a. historical cost principle b. convergence c. economic entity assumption d. monetary unit assumption Ans: a LO2 BT: K Difficulty: Easy TOT: 1.0 m in. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 68. Andre Dickinson, owner of Andre's Fine Wines, also owns a personal residence that costs $475,000. The market value of his residence is $625,000. During preparation of the financial statements for Andre's Fine Wines, the accounting concept most relevant to the presentation of Andre's home is a. the economic entity assumption. b. the fair value principle. c. the monetary unit assumption. d. convergence. Ans: a LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 69. Generally accepted accounting principles are a. income tax regulations of the Internal Revenue Service. b. standards that indi cate how to report economic events. c. theories that are based on physical laws of the universe. d. principles that have been proven correct by academic researchers. Ans: b LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AI CPA BB: Critical Thinking AICPA FN: Reporting 70. The historical cost principle requires that when assets are acquired, they be recorded at a. appraisal value. b. cost. c. market price. d. book value . Ans: b LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 71. The cost of an asset and its fair value are a. never the same. b. the same when the asset is sold. c. irrelevant when the asset is used by the business in its op erations. d. the same on the date of acquisition. Ans: d LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 72. The body of theory underlying accounting is not based on a. physical laws of nature. b. concepts. c. principles. d. definitions. Ans: a LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Accounting in A ction FOR INSTRUCTOR USE ONLY 1 - 13 73. The private sector organization involved i n developing accounting principles is the a. Feasible Accounting Standards Body. b. Financial Accounting Studies Board. c. Financial Accounting Standards Board. d. Financial Auditors' Standards Body. Ans: c LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 74. The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles . It is true that a. they are both gover nmental agencies. b. the SEC is a private organization of accountants. c. the SEC often mandates guidelines when no accounting principles exist. d. the SEC and FASB rarely cooperate in developing accounting standards. Ans: c LO2 BT: C Difficulty: Ea sy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 75. GAAP stands for a. Generally Accepted Auditing Procedures. b. Generally Accepted Accounting Principles. c. Generally Accepted Auditing Principles. d. Generally Accepted Accounting Procedures. Ans: b LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 76. Financial information that is capable of making a difference in a de cision is a. faithfully representative . b. relevant . c. convergent . d. generally accepted . Ans: b LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 77. The Duce Company has five plants nationwide that cost a total of $100 million. The current fair value of the plants is $ 500 million. The plants will be recorded and reported as assets at a. $100 million. b. $600 million. c. $400 million. d. $500 million. Ans: a LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 78. The fair value principle is applied for a. all assets. b. current assets. c. buildings. d. investment securities. Ans: d LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Test Bank for Financial and Managerial Accounting, Third Edition FOR INSTRUCTOR USE ONLY 1 - 14 79. The proprietorship form of business organization a. must have at least three owners in most states. b. represents the largest nu mber of businesses in the United States. c. combines the records of the business with the personal records of the owner. d. is characterized by a legal distinction between the business as an economic unit and the owner. Ans: b LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 80. The economic entity assumption requires that the activities a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners. d. of an entity be kept separate from the activities of its owner. Ans: d LO2 BT: K Difficult y: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 81. A business organized as a corporation a. is not a separate legal entity in most states. b. requires that stockholders be personally liable for t he debts of the business. c. is owned by its stockholders. d. terminates when one of its original stockholders dies. Ans: c LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 82. The partnership form of business organization a. is a separate legal entity. b. is a common form of organization for service -type businesses. c. enjoys an unlimited life. d. has limited liability. Ans: b LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 83. Which of the following is not an advantage of the corporate form of business organization? a. Limited liability of stockholders b. Transferability of ownership c. Unlimited personal liability for stockholders d. Unlimited life Ans: c LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 84. A small neighborhood barber shop that is operate d by its owner would likely be organized as a a. joint venture. b. partnership. c. corporation. d. proprietorship. Ans: d LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting