(Test Bank) Financial Accounting Fundamentals

Wild, 8

Business

Test Bank

8th Edition

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Test Bank for Financial Accounting Fundamentals, The downloadable file consists of 1574 pages, and the total size of the file is 6.74 MB. Purchase now only for highly discounted price.

Author(s): Wild

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Version 1 1 Chapter 1 (1) 1) Which of the following is not accomplished by accounting? A) Identifies business activities. B) Records business activities. C) Communicates business activities. D) Eliminates the need for interpreting financial data. E) Helps people make better decisions. 2) Which of the following is an external user of accounting information? A) Purchasing manager. B) Human resource manager. C) Lender. D) Chief executive officer (CEO). E) Marketing manager. 3) The primary objective of financial accounting is to: A) Serve the decision -making needs of internal users. B) Provide accounting information that serves ext ernal users. C) Monitor consumer needs, tastes, and price concerns. D) Provide information on both costs and benefits of looking after products and services. E) Know what, when, and how much product to produce. 4) The area of accounting a imed at serving the decision -making needs of internal users is: Version 1 2 A) Financial accounting. B) Managerial accounting. C) External auditing. D) SEC reporting. E) Bookkeeping. 5) Which of the following is not an external user of accounting information? A) Shareholders. B) Customers. C) Purchasing managers. D) Government regulators. E) Creditors. 6) Which of the following is not true regarding a Certified Public Accountant? A) Must meet education requirements. B) Must pass an examination. C) Must exhibit ethical character. D) Must meet experience requirements. E) Cannot hold any certificate other than a CPA. 7) Which of the following factors is not a compo nent of the fraud triangle? A) Opportunity B) Pressure C) Rationalization D) All of the above are components of the fraud triangle. Version 1 3 8) Which of the following is not true regarding ethics: A) Ethics are beliefs that sepa rate right from wrong. B) Good ethics are good business. C) Ethics do not affect the operations or outcome of a company. D) Accountants face ethical choices as they prepare financial reports. E) Ethics are accepted standards of good and bad behavior. 9) A corporation is: A) A business legally separate from its owners. B) Controlled by the FASB. C) Not responsible for its own acts and own debts. D) The same as a limited liability partnership. E) Not subject to double taxation. 10) The group that sets international preferred accounting practices is called the: A) AICPA. B) IASB. C) CAP. D) SEC. E) FASB. 11) The Securities and Exchange Commission (SEC) has given the task of set ting GAAP to the: Version 1 4 A) APB. B) FASB. C) AAA. D) AICPA. E) IASB. 12) The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the: A) Time -period assumption. B) Business entity assumption. C) Going -concern assumption. D) Revenue recognition principle. E) Measurement (Cost) principle. 13) The rule that requires financial statements to assume that the busines s will continue operating instead of being closed or sold is the: A) Going -concern assumption. B) Business entity assumption. C) Objectivity principle. D) Measurement (Cost) principle. E) Monetary unit assumption. 14) A compan y is considering purchasing a parcel of land that was originally acquired by the seller for $96,000. While the land is currently offered for sale at $172,000, it is considered by the purchaser as easily being worth $162,000, and is finally purchased for $1 59,000, the land should be recorded in the purchaser ’s books at: Version 1 5 A) $106,000. B) $159,000. C) $160,500. D) $162,000. E) $172,000. 15) A company is considering purchasing a parcel of land that was originally acquired by the seller for $85,000. While the land is currently offered for sale at $150,000, it is considered by the purchaser as easily being worth $140,000, and is finally purchased for $137,000, the land should be recorded in the purchaser ’s books at: A) $95,0 00. B) $137,000. C) $138,500. D) $140,000. E) $150,000. 16) To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the: A) Objectivity principle. B) Monetary unit assumption. C) Business entity assumption. D) Going -concern assumption. E) Revenue recognition principle. 17) The accounting principle that requires accounting information to be based on actual co st and requires assets and services to be recorded initially at the cash or cash -equivalent amount given in exchange, is the:Version 1 6 A) Accounting equation. B) Measurement (Cost) principle. C) Going -concern assumption. D) Cost -benefit constraint. E) Business entity assumption. 18) The rule that requires revenue to be recognized when (1) goods or services are provided to customers and (2) at the amount expected to be received from the customer is called the: A) Going -concern ass umption. B) Measurement (Cost) principle. C) Revenue recognition principle. D) Objectivity principle. E) Business entity assumption. 19) In accordance with GAAP, the question of when revenue should be recognized on the income statement is addressed by the: A) Revenue recognition principle. B) Going -concern assumption. C) Objectivity principle. D) Business entity assumption. E) Measurement (Cost)principle. 20) The Superior Company acquired a building for $500, 000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000? Version 1 7 A) Monetary unit assumption. B) Going -concern assumption. C) Measurement (Cost) principle. D) Business entity assumption. E) Revenue recognition principle. 21) On December 15 of the current year, Conrad Accounting Services received $40,000 from a client to provide bookkeeping services for the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not in the year the cash was received? A) Monetary un it assumption. B) Going -concern assumption. C) Measurement (Cost) principle. D) Business entity assumption. E) Revenue recognition principle. 22) Marsha Bogs is the owner of Bogs Legal Services. Which accounting principle requires Marsh a to keep her personal financial information separate from the financial information of Bogs Legal Services? A) Monetary unit assumption. B) Going -concern assumption. C) Measurement (Cost) principle. D) Business entity assumption. E) Expense recognition (Matching) principle. 23) A limited liability company (LLC): Version 1 8 A) Has owners called members. B) Is subject to additional business income tax. C) Includes a general owner with unlimited liability. D) Is the same as a co rporation. E) Must have more than one owner. 24) A partnership: A) Is also called a sole proprietorship. B) Has unlimited liability for its partners. C) Has an indefinite business life. D) Is a separate legal entity from its owners. E) Has owners called shareholders. 25) Which of the following accounting principles require that all goods and services purchased be recorded at actual cost? A) Going -concern assumption. B) Expense recognition (Matching) principle. C) Measurement (Cost) principle. D) Business entity assumption. E) Consideration assumption. 26) Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported? A) Going -concern assumption. B) Expense recognition (Matching) principle. C) Measurement (Cost) principle. D) Business entity assumption. E) Consideration assumption. Version 1 9 27) Revenue is properly recognized: A) Wh en the customer makes an order. B) Only if the transaction creates an account receivable. C) At the end of the accounting period. D) When goods or services are provided to customers and at the amount expected to be received from the customer. E) When cash from a sale is received. 28) Which of the following is not an external user of accounting information? A) Lenders. B) Shareholders. C) Politicians. D) Chief executive officer (CEO). E) Customers. 29) Which o f the following is an internal user of accounting information? A) Customers. B) Internal Revenue Service. C) Human resource manager. D) Shareholders. E) Lenders. 30) If a company uses $1,600 of its cash to purchase supplies, the effect on the accounting equation would be: Version 1 10 A) Assets increase $1,600 and liabilities decrease $1,600. B) One asset increases $1,600 and another asset decreases $1,600, causing no effect. C) Assets decrease $1,600 and equity decreases $1,600. D) Assets decrease $1,600 and equity increases $1,600. E) Assets increase $1,600 and liabilities increase $1,600. 31) If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be: A) As sets increase $1,300 and liabilities decrease $1,300. B) One asset increases $1,300 and another asset decreases $1,300, causing no effect. C) Assets decrease $1,300 and equity decreases $1,300. D) Assets decrease $1,300 and equity increases $1,300. E) Assets increase $1,300 and liabilities increase $1,300. 32) If a company receives $11,300 from a client for services provided, the effect on the accounting equation would be: A) Assets decrease $11,300 and equity decreases $11,300. B) Assets increase $11,300 and liabilities decrease $11,300. C) Assets increase $11,300 and liabilities increase $11,300. D) Liabilities increase $11,300 and equity decreases $11,300. E) Assets increase $11,300 and equity increases $11,300. 33) If a company receives $12,000 from a client for services provided, the effect on the accounting equation would be: Version 1 11 A) Assets decrease $12,000 and equity decreases $12,000. B) Assets increase $12,000 and liabilities decrease $12,000. C) Assets increase $12,000 and liabilities increase $12,000. D) Liabilities increase $12,000 and equity decreases $12,000. E) Assets increase $12,000 and equity increases $12,000. 34) If a company purchases equipment cos ting $5,500 on credit, the effect on the accounting equation would be: A) Assets increase $5,500 and liabilities decrease $5,500. B) Equity decreases $5,500 and liabilities increase $5,500. C) One asset increases $5,500 and another asset decrea ses $5,500. D) Assets increase $5,500 and liabilities increase $5,500. E) Equity increases $5,500 and liabilities decrease $5,500. 35) If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would b e: A) Assets increase $4,500 and liabilities decrease $4,500. B) Equity decreases $4,500 and liabilities increase $4,500. C) One asset increases $4,500 and another asset decreases $4,500. D) Assets increase $4,500 and liabilities increase $4,5 00. E) Equity increases $4,500 and liabilities decrease $4,500. 36) An example of a financing activity reported on the statement of cash flows is:Version 1 12 A) Buying office supplies. B) Obtaining a long -term loan. C) Buying office equipme nt. D) Selling inventory. E) Buying land. 37) Increases in equity that result from providing products or services to customers are called: A) Liabilities. B) Revenues. C) Financing activities. D) Investing activities. E) Expe nses. 38) Which of the following decreases equity: A) Investing activities. B) Assets. C) Accounts receivable. D) Revenues. E) Expenses. 39) An example of an investing activity on a statement of cash flows is:Version 1 13 A) Paying wages of employees. B) Cash received from clients for services provided. C) Purchase of land. D) Selling inventory. E) Long -term borrowing of cash from lenders. 40) Net Income: A) Decreases equity. B) Equals equity minus liabilities. C) Equals assets minus liabilities. D) Occurs when revenues exceed expenses. E) Represents creditor claims against assets. 41) If equity is $338,000 and liabilities are $188,000, then assets equal: A) $150,000. B) $188,000. C) $338,000. D) $526,000. E) $864,000. 42) If equity is $300,000 and liabilities are $192,000, then assets equal: A) $108,000. B) $192,000. C) $300,000. D) $492,000. E) $792,000. Version 1 14 43) If assets are $370,000 and liabilities are $196,000, then equity equals: A) $174,000. B) $196,000. C) $370,000. D) $566,000. E) $936,000. 44) If assets are $300,000 and liabilities are $192,000, then equity equals: A) $108,000. B) $192,000. C) $300,000. D) $492,000. E) $792,000. 45) Resources a company owns or controls that are expected to yield future benefits are: A) Assets. B) Revenues. C) Liabilities. D) Payables. E) Expenses. 46) Increases in equity from a company's sales of products or services to customers are: Version 1 15 A) Assets. B) Revenues. C) Liabilities. D) Accounts payable. E) Expenses. 47) The difference between a company's assets and its liabilities, or net assets is: A) Net income. B) Expense. C) Equity. D) Revenue. E) Net loss. 48) Creditors' claims on assets are called: A) Net losses. B) Expenses. C) Revenues. D) Equity. E) Liabi lities. 49) Decreases in equity from costs of providing products or services to customers are called: A) Liabilities. B) Equity. C) Accounts receivable. D) Expenses. E) Wages receivable.