(Test Bank) Financial Accounting Canadian Edition

Waybright,Kemp,Elbarrad, 2

Business

Test Bank

2nd Edition

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Test Bank for Financial Accounting Canadian Edition, The downloadable file consists of 511 pages, and the total size of the file is 4.54 MB. Purchase now only for highly discounted price.

Author(s): Waybright, Kemp, Elbarrad

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© 2016 Pearson Canada Inc. TEST Bank (All Chapters) Bharat Aggarwal Financial Accounting Second Canadian Edition Jeffrey Waybright , Robert Kemp , Sherif Elbarrad , 1 © 2016 Pearson Canada Inc. Financial Accounting, 2nd Cdn. Ed. (Waybright) Chapter 1 Business, Accounting, and You 1.1 Describe the major types of business organizations 1) Many law and accounting firms are set up as partnerships. Answer: TRUE Diff: 1 LO: 1 -1 Describe the maj or types of business organizations Skill: Concept Blooms: Comprehension 2) Sears is an example of a sole proprietor. Answer: FALSE Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 3) Walmart is an example of a corporate merchandising business. Answer: TRUE Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Concept Blooms: Comprehension 4) Which of the following types of organization would probably sell goods? A) Merchan dising operation B) Service operation C) Not -for-profit operation D) Manufacturing operation E) Business operation Answer: A Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 2 © 2016 Pearson Canada Inc. 5) Which of the following do NOT pay taxes through their individual owners? A) Single ownership B) Sole proprietorship C) Partnership D) Corporation E) Private ownership Answer: D Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowled ge 6) By definition, which type of organization has shareholders? A) Partnerships B) Sole proprietorships C) Corporations D) Limited liability companies E) Private enterprise Answer: C Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 7) Which of the following types of organizations would produce goods? A) Merchandising operation B) Service operation C) Not -for-profit operation D) Manufacturing operation E) Government operation Answer: D Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 8) Target would primarily be considered a: A) manufacturing business. B) merchandising business. C) service business. D) not -for-profit business. E) private enterpris e. Answer: B Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 3 © 2016 Pearson Canada Inc. 9) Which type of company is best described as a separate legal entity? A) Limited liability company B) Proprietorship C) Corporation D) Pa rtnership E) Not -for-profit Answer: C Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 10) Given the information below, place an (SP) if the statement describes a sole proprietorship, a (P) if the statement describes a partnership, and a (C) if the statement describes a corporation. A Is a separate legal entity. B Is flexible regarding the division of the business income. C Medical, accounting, and law firms are primarily this type of business. D Generally has one owner. E The owner has personal responsibility. Answer: A. C B. P C. P D. SP E. SP Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 11) Which type of business organization is own ed by its shareholders? A) Corporation B) Partnership C) Limited liability company D) Sole proprietorship E) Not -for-profit company Answer: A Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 4 © 2016 Pearson Canada Inc. 12) What is the most difficult type of business to form? Answer: Corporation Diff: 2 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 13) Common examples of business organizations include sole proprietorship, partners hip, and corporation. Instructions: For each business listed below, indicate the type of business organization. Business Type of Business Organization Mr. Grossman, electrician Loblaws Supermarket Home Depot Smith, Smith, and Smith Lawyers Sears Department Stores R. Patel, Plumber for Hire Tan, Zhou, and Yin, Accountants The Bay Department Stores Answer: Business Type of Business Organization Dr. Grossman, dentist Sole proprietorship Loblaws Supermarket Corporation Home Depot Corporation Smith, Smith, and Smith Lawyers Partnership Sears Department Stores Corporation R. Patel, Plumber for Hire Sole proprietorship Tan, Zhou, and Yin, Accountants Partnership The Bay Department Stores Corporation Diff: 2 LO: 1 -1 Describe the major types of business organizations Skill: Concept Blooms: Comprehension 5 © 2016 Pearson Canada Inc. 14) A partnership should have at least one general partner and may have one or more limited partners. Answer: TRUE Diff: 1 LO: 1 -1 Describe the major types of business organ izations Skill: Recall Blooms: Knowledge 15) A limited partner has the right to manage and has limited liability. Answer: FALSE Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 16) A general partn er does not have the right to manage and has unlimited liability. Answer: FALSE Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Recall Blooms: Knowledge 17) Gus Davidson has a small business in the packet delivery industry. Gus owns a truck that he uses for personal purposes and business purposes. He charges all the costs associated with the truck to the business. Which GAAP principle is being violated? Why? Answer: The business entity concept is being violated because Gus is not keeping his personal affairs separate from his business affairs. The truck in question should either be used for business purposes or personal purposes, but not both. This principle is important because it ensures that assets, liabilities, and equi ties are reported in a faithfully representative way. Diff: 1 LO: 1 -1 Describe the major types of business organizations Skill: Application Blooms: Knowledge 1.2 Identify the needs of the different users of accounting information 1) Banks are cons idered internal users of financial statements. Answer: FALSE Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Recall Blooms: Knowledge 2) Investors are considered external users of financial statements. Answ er: TRUE Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Recall Blooms: Knowledge 6 © 2016 Pearson Canada Inc. 3) Shareholders are considered internal users of financial statements. Answer: FALSE Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Recall Blooms: Knowledge 4) Managers are considered internal users of financial statements. Answer: TRUE Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Recall Blooms: Knowledge 5) Which branch of accounting provides accounting information for internal users to help make business decisions? A) Managerial accounting B) Financial accounting C) IFRS D) ASPE E) Taxation Answer: A Diff: 1 LO: 1 -2 Identify th e needs of the different users of accounting information Skill: Recall Blooms: Knowledge 6) Which one of these users is not considered an external user? A) Board of directors B) Banks C) Investors D) Shareholders E) All of above are external users Answ er: A Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Recall Blooms: Knowledge 7 © 2016 Pearson Canada Inc. 7) Which one of these users is not considered an internal user? A) Shareholders B) Employees C) Managers D) Board of Directors E) All of above are internal users Answer: A Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Recall Blooms: Knowledge 8) This branch of accounting focuses on serving the needs of external users who need to ma ke sound economic decisions. A) Managerial accounting B) Financial accounting C) IFRS D) ASPE E) Taxation Answer: B Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Recall Blooms: Knowledge 9) Who are the inte rnal users of financial statements? What are their specific needs with respect to financial information? Answer: One group of internal users are boards of directors who will be looking at financial statement information to assess the company's overall pr ofitability, costs, and aggregate figures to assist them in making strategic decisions. A second group are sales managers who will be interested in knowing the breakdown of sales figures per product or region. A third group of internal users are production managers who will be interested in information about the costs of production. Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Application Blooms: Knowledge 8 © 2016 Pearson Canada Inc. 10) Who are the external users of financial stateme nts? What are their specific needs with respect to financial information? Answer: The first group of external users are investors who are looking for information about the profitability and risk of the business so that they can compare different investme nt opportunities. The second group are shareholders who are concerned mainly with profitability and profit distributions. The third group are banks who are looking for information to help in assessing the ability of the business to repay loans and interest . Regulatory bodies such as the CRA are concerned with the net income of the business upon which taxes are calculated. Diff: 1 LO: 1 -2 Identify the needs of the different users of accounting information Skill: Application Blooms: Knowledge 1.3 Ident ify career opportunities in accounting and related fields 1) By taking accounting classes, the student is learning the "language of business." Answer: TRUE Diff: 1 LO: 1 -3 Identify career opportunities in accounting and related fields Skill: Recall Blooms: Knowledge 2) To manage a business effectively, an owner or manager would benefit greatly from having some knowledge of accounting. Answer: TRUE Diff: 1 LO: 1 -3 Identify career opportunities in accounting and related fields Skill: Recall Blooms: Knowledge 3) Which of the following is NOT a reason to study accounting? A) A student will become aware of ethics in business. B) A student will learn the language of business. C) A student will improve his or her math skills. D) A student will learn to an alyze financial information. E) A student will prepare financial statements that are in accordance with GAAP. Answer: C Diff: 1 LO: 1 -3 Identify career opportunities in accounting and related fields Skill: Recall Blooms: Knowledge 9 © 2016 Pearson Canada Inc. 4) The CMA, CGA, an d CA accounting bodies are looking to merge into one accounting body called CPA Canada. Answer: TRUE Diff: 1 LO: 1 -3 Identify career opportunities in accounting and related fields Skill: Recall Blooms: Knowledge 5) In the accounting profession there are several areas of expertise. Name the four main areas of expertise. Answer: Financial accounting Managerial accounting Taxation Banking and financial services Diff: 2 LO: 1 -3 Identify career opportunities in accounting and related fields Skill: Conce pt Blooms: Comprehension 6) The accounting profession has several related fields. Identify and discuss the responsibilities of each field. Answer: Financial accounting: This area includes financial reporting, analysis, policies, auditing, and forensic accounting. Financial accounting serves the needs of both external and internal customers. External customers are traditionally the focus. Managerial accounting: This area includes cost accounting, budgeting, planning, control, and performance evaluation. Management accounting focuses on making business decisions primarily for internal use. Taxation: This area includes tax planning, preparation, and investigation. Taxation serves both individuals and companies. Banking and financial services: This area inc ludes financial analysis, planning, investments, risk analysis, and credit management. This branch serves both individuals and companies. This field mainly focuses on investment and credit. Diff: 2 LO: 1 -3 Identify career opportunities in accounting and r elated fields Skill: Concept Blooms: Comprehension 10 © 2016 Pearson Canada Inc. 1.4 Explain the key accounting principles and the conceptual framework 1) Accounting is important because the process "keeps score" of the financial aspects of a business. Answer: TRUE Diff: 1 LO: 1-4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 2) The definition of the economic entity concept includes the requirement that personal assets must be combined with business assets. Answer: FALSE Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 3) Financial statements are historical reports of what has taken place financially in a business. Answer: TRUE Diff: 1 LO: 1 -4 Explain t he key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 4) International Financial Reporting Standards (IFRS) are used in every country in the world. Answer: FALSE Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 5) Financial statements can help the managers of a business make decisions regarding the business. Answer: TRUE Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual fram ework Skill: Recall Blooms: Knowledge 6) Market value and historical cost (value) are the same concept. Answer: FALSE Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 11 © 2016 Pearson Canada Inc. 7) Accountants need to exercise professional judgment. Answer: TRUE Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 8) The main role of accounting is to compile reports to determine the profit made b y a company over a period of time. Answer: FALSE Diff: 2 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 9) The goal of IFRS is to create a global set of accounting standards. Answer: TRUE Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 10) IFRS and ASPE are interchangeable. Answer: FALSE Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 11) To ensure that the guidelines for right behaviour are followed, a corporation should follow: A) ethical principles. B) accounting law. C) the corporate culture. D) the leaders in their category of business. E) the Enro n rules. Answer: A Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Concept Blooms: Comprehension 12 © 2016 Pearson Canada Inc. 12) Accounting principles include: A) historical cost/fair value, revenue and expense recognition, and going co ncern. B) historical cost/fair value, revenue and expense recognition, and time period assumption. C) historical cost/fair value, revenue and expense recognition, and full disclosure. D) historical cost/fair value, economic entity, and full disclosure. E) historical cost/fair value, economic entity, and revenue and expense recognition. Answer: C Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 13) The main goal of understanding the proces s of accounting is to help ensure that the business is: A) profitable. B) ethical. C) competitive. D) admired by the customer. E) environmentally friendly. Answer: A Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill : Recall Blooms: Knowledge 14) A Canadian publicly traded enterprise uses which reporting standard? A) Accounting Standards for Private Enterprises B) International Financial Reporting Standards C) Accounting Standards for Not -for-Profit Organizations D) Accounting Standards for Pension Plans E) Accounting Standards for Canadian Accounting Answer: B Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Concept Blooms: Comprehension 15) Accounting standards for pr ivate enterprises (ASPE) continues to use: A) present value. B) current cost. C) realizable value. D) historical cost approach. E) net present value. Answer: D Diff: 2 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Con cept Blooms: Comprehension 13 © 2016 Pearson Canada Inc. 16) Mathew owns an art supplies store. In the initial accounting records, he included his personal computer and all of his personal art supplies. What principle of accounting is Mathew violating? A) Going concern B) Cost C) Rel iability D) Economic entity E) Materiality Answer: D Diff: 2 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Application Blooms: Application 17) During the life of a business entity, financial statements are prepared a t specific points in time. This is according to what assumption? Answer: Time period assumption Diff: 2 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 18) Marcus is negotiating with friends w ho may buy some camping equipment in the near future. He records this information as possible sales. What principle is Marcus violating? Answer: Revenue recognition Diff: 2 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Application Blooms: Knowledge 19) What is the purpose of financial accounting information? Answer: To help investors, creditors, and others to make decisions Diff: 2 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Concept Blooms: Comprehension 20) When a person combines personal and business accounts, what concept or principle of accounting is being violated? Answer: Economic entity Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framewo rk Skill: Concept Blooms: Comprehension 14 © 2016 Pearson Canada Inc. 21) Which accounting concept or principle states that information should be free of biases and neutral? Answer: Reliability Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Concept Blooms: Comprehension 22) International Financial Reporting Standards (IFRS) became effective in Canada on what date? Answer: January 1, 2011 Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recal l Blooms: Knowledge 23) Accountants are required to use ________ judgment in many situations. Answer: professional Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Recall Blooms: Knowledge 24) Identify and exp lain the four underlying assumptions of the conceptual framework. Answer: Monetary unit assumption It is assumed that the purchasing power of the dollar is stable. This means that dollars of different time periods are considered to have the same value. Economic entity assumption This assumption implies that the affairs of the organization are economically separate from the owners. Going -concern principle Financial statements are prepared based on the assumption that the business entity is a going concern and will continue in operation for the foreseeable future. Time period assumption To be able to assess a business's performance in a timely manner, it is assumed that the operation of a business is divided into a series of time periods. Diff: 1 LO: 1 -4 Explain the key accounting principles and the conceptual framework Skill: Concept Blooms: Comprehension