(Test Bank) College Accounting: A Practical Approach

Slater,Deschamps, 15

Business

Test Bank

15th Edition

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Test Bank for College Accounting: A Practical Approach, The downloadable file consists of 1005 pages, and the total size of the file is 8.23 MB. Purchase now only for highly discounted price.

Author(s): Slater, Deschamps

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1 Copyright © 2023 Pearson Education, Inc. College Accounting, 15e (Slater) Chapter 1 Accounting Concepts and Procedures Learning Objective 1-1 1) The type of business organization where the owners are NOT personally liable for the business’s debts is a: A) corporation B) partnership C) sole proprietorship D) All of the above Answer: A Diff: 2 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 2) The purpose of the accounting process is to provide financial information about: A) sole proprietorships B) small businesses C) large corporations D) All of these answers are correct Answer: D Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 3) Accounting provides information to: A) investors B) government C) managers D) All of these answers are correct Answer: D Diff: 2 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 2 Copyright © 2023 Pearson Education, Inc. 4) Which of the following is a characteristic of a sole proprietorship? A) Business owned by more than one person. B) Easy to form. C) Each stockholder acts as an owner of the company. D) Can continue indefinitely. Answer: B Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 5) A partnership is a business which: A) is easy to form B) ends with the death of a partner C) is owned by more than one person D) All of these answers are correct Answer: D Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 6) Which is an advantage of a sole proprietorship form of business? A) There is limited personal risk. B) The business can continue indefinitely. C) The owner makes all the decisions. D) The business is owned by stockholders. Answer: C Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 7) Which of the following is NOT a type of business organization? A) Corporation B) Partnership C) Sole proprietorship D) Limited Asset Corporation Answer: D Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 3 Copyright © 2023 Pearson Education, Inc. 8) A corporation: A) is legally separate from its owners B) is owned by stockholders C) has limited risk to stockholders D) All of the above Answer: D Diff: 2 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 9) The basic accounting equation is: A) Assets + Liabilities = Owner’s Equity B) Assets = Liabilities - Owner's Equity C) Assets = Owner’s Equity - Liabilities D) Assets = Liabilities + Owner's Equity Answer: D Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 10) A law firm would be considered a: A) merchandise company B) manufacturer C) service company D) retailer Answer: C Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 11) GAAP stand for ______________________. A) Generally Accepted Accounting Practices B) General Accounting Accepted Practices C) Generally Accepted Accounting Principles D) General Accounting Application Practices Answer: C Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 4 Copyright © 2023 Pearson Education, Inc. 12) The purchase of supplies for cash would affect which account category? A) Assets B) Liabilities C) Capital D) Expense Answer: A Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 13) Items owned by the business such as land, supplies and equipment are: A) Assets B) Liabilities C) Owner's Equity D) Expenses Answer: A Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 14) Which of the following is NOT an Asset? A) Cash B) Accounts Receivable C) Buildings D) All of the above are Assets Answer: D Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 15) If total liabilities increased by $10,000 and the assets increased by $10,000 during the accounting period, what is the change in the owner's equity amount? A) No effect on owner's equity B) Decrease of $10,000 C) Increase of $20,000 D) Decrease of $40,000 Answer: A Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 5 Copyright © 2023 Pearson Education, Inc. 16) The claims of creditors against the Assets are: A) Expenses B) Revenues C) Liabilities D) Owner's Equity Answer: C Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 17) The Owner's Equity of Logan's Company is equal to one-half of the total Assets. Liabilities equal $90,000. What is the amount of Owner's Equity? A) $45,000 B) $90,000 C) $135,000 D) None of these answers is correct. Answer: B Explanation: If owner’s equity equals one-half of total assets, then liabilities also equal one-half of total assets because Assets = Liabilities + Owner’s Equity. Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 18) Assets are equal to: A) Liabilities + Owner's Equity. B) Liabilities - Owner's Equity. C) Liabilities - Revenues. D) Revenues - Expenses. Answer: A Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 19) The basic accounting equation can be written as: A) Assets = Revenues - Expenses B) Assets = Liabilities - Owner's Equity C) Profit = Revenues - Expenses D) Assets — Owner’s Equity = Liabilities Answer: D Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 6 Copyright © 2023 Pearson Education, Inc. 20) An acceptable variation of the accounting equation is: A) Assets - Owner's Equity = Liabilities B) Revenues = Profit - Expenses C) Assets = Liabilities - Owner's Equity D) All of these answers are correct Answer: A Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 21) If total Liabilities are $50,000 and Owner's Equity is $35,000, the total Assets must be: A) $85,000 B) $15,000 C) $42,500 D) $70,000 Answer: A Explanation: Total assets = Total liabilities $50,000 + Total owner’s equity $35,000 = $85,000 Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 22) If total Liabilities are $2000 and total Assets are $16,000, Owner's Equity must be: A) $14,000 B) $9000 C) $16,000 D) $18,000 Answer: A Explanation: Total Assets $16,000 = Total liabilities $2,000 + Total owner’s equity $14,000 Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 23) How does the purchase of supplies on account affect the accounting equation? A) Assets increase; Liabilities decrease B) Assets increase; Owner's Equity increases C) Assets increase; Liabilities increase D) Liabilities increase; Owner's Equity decreases Answer: C Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 7 Copyright © 2023 Pearson Education, Inc. 24) Strum Hardware has total Assets of $60,000. What are the total Assets if a new building is purchased for $5000 cash? A) $70,000 B) $65,000 C) $55,000 D) $60,000 Answer: D Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 25) Harvest Moon Company has total Assets of $37,000. If $2000 cash is used to purchase a new computer, the total Assets would be: A) $37,000 B) $35,000 C) $39,000 D) $2000 Answer: A Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 26) Katie's Vegetarian Restaurant, with total Assets of $121,000, borrows $27,000 cash from the bank. Which of the following is a true statement after borrowing the money? A) Total Assets are now $148,000. B) Total Assets are now $94,000. C) Total Assets are now $175,000. D) Total Assets are now $121,000. Answer: A Explanation: Total Assets $121,000 + Cash $27,000 = $148,000 Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 27) Logan's Motor Sports buys $47,000 of supplies for cash. Which of the following is a true statement? A) Total Assets increase. B) Total Assets are unchanged. C) Total Assets decrease. D) Total Liabilities increase. Answer: B Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 8 Copyright © 2023 Pearson Education, Inc. 28) Bonnie's Baskets purchases $3000 worth of office equipment on account. This causes: A) Cash and Capital to decrease B) Office Equipment and Accounts Payable to increase C) Office Equipment to decrease and Accounts Payable to increase D) Accounts Payable to increase and Capital to decrease Answer: B Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 29) Eileen's Corner Shoppe purchases a desk for cash. This causes: A) Cash and Capital to increase B) Furniture and Cash to increase C) Furniture to increase and Cash to decrease D) Accounts Payable to increase and Capital to increase Answer: C Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 30) Bob purchased a new computer for the company for cash. The transaction will: A) increase Computer; increase Capital B) decrease Cash; increase Accounts Payable C) decrease Cash; increase Computer D) increase Supplies; increase Accounts Payable Answer: C Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 31) Pat purchased $8000 of new electronic equipment for her BJ Company on account. The effect on the basic accounting equation was to: A) increase Cash $8000 and increase Equipment $8000. B) increase Equipment $8000 and increase Accounts Payable $8000. C) decrease Cash $8000and increase Accounts Payable $8000. D) decrease Cash $8000 and increase Equipment $8000. Answer: B Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 9 Copyright © 2023 Pearson Education, Inc. 32) If Total Assets are $68,000 and Total Owner’s Equity is $30,000, Liabilities must equal: A) $38,000 B) $30,000 C) $98,000 D) $68,000 Answer: A Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 33) Which of the following would result if the business purchased equipment for cash? A) Supplies would increase and Cash would decrease. B) Supplies would increase and Capital would increase. C) Equipment would increase and Cash would decrease. D) The purchase of supplies is not a business transaction. Answer: C Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 34) Which of the following would result if a business purchased Equipment with a 40% down payment and the rest on account? A) Equipment and Cash would increase, and Accounts Payable would decrease. B) Accounts Payable would increase, Equipment and Cash would decrease. C) Since the equipment has not been paid in full, there is nothing to record. D) Equipment and Accounts Payable would increase, Cash would decrease. Answer: D Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 35) Mary invested cash in her new business. What effect will this have? A) Increase an Asset and increase a Liability B) Decrease an Asset and increase a Liability C) Increase an Asset and increase Owner's Equity D) Decrease an Asset and decrease Owner's Equity Answer: C Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 10 Copyright © 2023 Pearson Education, Inc. 36) A business received $10,000 from a customer in payment of an amount owed. The effect of the transaction on the accounting equation was to: A) increase one Asset, decrease another Asset. B) increase an Asset, increase a Liability. C) decrease an Asset, decrease a Liability. D) increase an Asset, increase Owner's Equity. Answer: A Diff: 2 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 37) The purchase of supplies with both cash and on account was recorded as only an open account purchase. Due to this error: A) Assets would be understated. B) Liabilities would be overstated. C) Owner's Equity would be overstated. D) None of the above is correct. Answer: B Diff: 3 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 38) A purchase of a vehicle on credit would have what effect on the accounting equation? A) Total Assets and total Liabilities increase. B) Total Liabilities are overstated. C) Total Owner's Equity is overstated. D) Both A and B are correct. Answer: A Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 39) The cash purchase of a truck was recorded as a credit purchase. Due to this error: A) Assets were understated. B) Liabilities were understated. C) Answers A and B are both correct. D) None of the above is correct. Answer: D Diff: 3 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 11 Copyright © 2023 Pearson Education, Inc. 40) The right side of the basic accounting equation shows what is owed by the business. Answer: TRUE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 41) Generally Accepted Accounting Principles are the procedures and guidelines that must be followed every other year. Answer: FALSE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 42) The functions of accounting include analyzing, recording, classifying, summarizing, reporting, strategic management, and environmental assessment. Answer: FALSE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 43) A sole proprietorship ends with the death of the owner. Answer: TRUE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 44) If the Liabilities owed by a business total $150,000, then the Assets must also total $150,000. Answer: FALSE Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 45) The left side of the basic accounting equation must always be greater than the right side of the equation. Answer: FALSE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 12 Copyright © 2023 Pearson Education, Inc. 46) If the Assets owned by a business total $59,000, Owner's Equity must also total $59,000. Answer: FALSE Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 47) In a shift of Assets, the composition of the Assets changes but total Assets do not change. Answer: TRUE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 48) If Owner's Equity totals $73,000 and Liabilities total $40,000, then Assets owned by a business totals $113,000. Answer: TRUE Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 49) Creditors' claims against Assets are called Liabilities. Answer: TRUE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Describe the components of and prepare the four basic financial statements 50) The basic accounting equation states that total Assets must always equal total Liabilities plus Owner's Equity. Answer: TRUE Diff: 1 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Describe the components of and prepare the four basic financial statements 51) If Liabilities are $22,000 and Assets are $42,000, Owner's Equity will be $20,000. Answer: TRUE Diff: 1 LO: 1-1 AACSB: Analytical Thinking Learning Outcome: Analyze and record transactions and their effects on the financial statements 13 Copyright © 2023 Pearson Education, Inc. 52) Put the 7 main steps of the accounting process in order (from 1 -7) below: ________ Interpreting ________ Analyzing ________ Recording ________ Classifying ________ Reporting ________ Communication ________ Summarizing Answer: 6 Interpreting 1 Analyzing 2 Recording 3 Classifying 5 Reporting 7 Communication 4 Summarizing Diff: 3 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles 53) Discuss the advantages and disadvantages of sole proprietorships, partnerships and corporations. Answer: A sole proprietorship is a business that has one owner. The advantage of a sole proprietorship is that the owner makes all of the decisions for the business. Another advantage is ease of formation. A disadvantage is that if the business cannot pay its obligations, the business owner must pay them from personal assets. The business ends with the death of the owner or the closing of the business. A partnership is a business owned by more than one person. Its advantage is ease of formation. The disadvantages are that partners could lose personal assets to meet obligations of the partnership and a partnership ends with death of a partner from the partnership. A corporation is a business owned by stockholders. The advantages are that stockholders have limited personal risk which is limited to their investment in the company. In addition, the corporation has an unlimited life and it is easy to raise capital. A disadvantage is that a corporation is more difficult to form and stockholders have a limited ability to influence business decisions. Diff: 2 LO: 1-1 AACSB: Written and Oral Communication Learning Outcome: Define accounting terms, accounting concepts and principles 54) What is the difference between Bookkeeping and Accounting? Answer: Bookkeeping is the recording function within the accounting process. A bookkeeper records the transactions into the company's books (more transactional), while an accountant reviews and analyzes the information including the transactions which are recorded. The accountant then takes the information and prepares the financial statements. Diff: 2 LO: 1-1 AACSB: Written and Oral Communication Learning Outcome: Define accounting terms, accounting concepts and principles 14 Copyright © 2023 Pearson Education, Inc. 55) Determine the missing amount in each accounting equation. Assets Liabilities Owner’s Equity A. $10,000 $2,000 ? B. ? $5,000 $4,000 C. $15,000 ? $10,000 D. $12,000 $4,000 ? Answer: A. $8,000 B. $9,000 C. $5,000 D. $8,000 Diff: 2 LO: 1-1 AACSB: Reflective Thinking Learning Outcome: Define accounting terms, accounting concepts and principles