(Test Bank) Principles Of Financial Accounting (Chapter 1-18)

Weygandt,Kimmel,Kieso, 12

Business

Test Bank

12th Edition

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Author(s): Weygandt, Kimmel, Kieso

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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 9. 1 K 17. 2 K 25. 4 K sg33. 1 K 2. 1 K 10. 1 K 18. 2 K 26. 4 K sg34. 1 K 3. 1 C 11. 1 K 19. 2 K 27. 4 K sg35. 2 K 4. 1 K 12. 2 K 20. 2 C 28. 5 C sg36. 2 C 5. 1 K 13. 2 K 21. 3 K 29. 5 C sg37. 2 K 6. 1 C 14. 2 K 22. 3 K 30. 6 C sg38. 3 K 7. 1 K 15. 2 K 23. 3 K 31. 6 K sg39. 4 K 8. 1 C 16. 2 K 24. 4 K 32. 6 K sg40. 5 K Multiple Choice Questions 41. 1 K 69. 2 C 97. 3 K 125. 5 K st153. 1 K 42. 1 K 70. 2 K 98. 3 K 126. 5 K st154. 1 K 43. 1 K 71. 2 K 99. 3 K 127. 5 AP sg155. 2 K 44. 1 C 72. 2 C 100. 3 C 129. 5 AP st156. 2 K 45. 1 K 73. 2 K 101. 3 K 129. 5 AP sg157. 2 K 46. 1 K 74. 2 K 102. 3 C 130. 5 K st158. 2 K 47. 1 K 75. 2 K 103. 3 AP 131. 5 C sg159. 3 K 48. 1 K 76. 2 K 104. 3 AP 132. 5 K sg160. 4 K 49. 1 C 77. 2 K 105. 3 AP 133. 5 K sg161. 4 C 50. 1 C 78. 2 K 106. 3 AP 134. 5 AP sg162. 5 C 51. 1 C 79. 2 C 107. 3 AP 135. 5 AP sg163. 6 K 52. 1 C 80. 2 C 108. 3 C 136. 5 AP 164. 7 K 53. 1 C 81. 2 K 109. 3 AP 137. 5 AP 165. 7 K 54. 1 C 82. 2 K 110. 3 C 138. 5 AP 166. 7 K a55. 6 K 83. 2 C 111. 3 C 139. 5 AP 167. 7 K a56. 6 K 84. 2 K 112. 4 C 140. 5 AP 168. 7 K a57. 6 K 85. 2 K 113. 4 C 141. 5 AP 169. 7 K a58. 6 C 86. 2 K 114. 3 C 142. 5 AP 170. 7 K 59. 1 K 87. 2 K 115. 4 C 143. 5 AP 171. 7 K 60. 1 K 88. 3 K 116. 4 K 144. 5 AP 172. 7 K 61. 2 C 89. 3 K 117. 4 C 145. 5 AP 173. 7 K 62. 2 K 90. 3 K 118. 4 C 146. 5 AP 174. 7 K 63. 2 C 91. 3 C 119. 4 C 147. 5 AN 175. 7 K 64. 2 K 92. 3 K 120. 4 AN 148. 5 AN 176. 7 K 65. 2 K 93. 3 K 121. 4 C 149. 5 AN 177. 7 K 66. 2 C 94. 3 C 122. 5 C 150. 5 AN 67. 2 K 95. 3 K 123. 5 C 151. 5 AN 68. 2 K 96. 3 K 124. 5 K sg152. 1 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 Accounting Principles, Twelfth Edition FOR INSTRUCTOR USE ONLY 1 - 2 SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BL OOM’S TAXONOMY Brief Exercises 178. 1 C 181. 3 AP 184. 4 C 187. 5 AP 179. 3 K 182. 3 AP 185. 5 AP 188. 5 AP 180. 3 K 183. 3 C 186. 5 C Exercises 189. 1,4 K 197. 3 C 205. 4 C 213. 5 AP 221. 5 AN 190. 3 C 198. 3,4 C 206. 4 C 214. 5 AP 222. 5 C 191. 3 C 199. 3,4 C 207. 4 AP 215. 5 AP 223. 5 AP 192. 3 AP 200. 3,4 AP 208. 4 C 216. 5 AN 224. 5 AP 193. 3 C 201. 4 AP 209. 4 C 217. 5 AP 225. 5 AP 194. 3 AP 202. 4 AP 210. 4 C 218. 5 AP 195. 3 AN 203. 4 C 211. 4 C 219. 5 C 196. 3 AN 204. 4 AN 212. 4 C 220. 5 AP Completion Statements 226. 1 K 228. 1 K 230. 2 K 232. 2 K 234. 3 K 227. 1 K 229. 1 K 231. 2 K 233. 3 K 235. 5 K 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 7. TF 34. TF 46. MC 52. MC 153. MC 228. C 2. TF 8. TF 41. MC 47. MC 53. MC 154. MC 229. C 3. TF 9. TF 42. MC 48. MC 54. MC 178. BE 4. TF 10. TF 43. MC 49. MC 59. MC 189. Ex 5. TF 11. TF 44. MC 50. MC 60. MC 226. C 6. TF 33. TF 45. MC 51. MC 152. MC 227. C Learning Objective 2 12. TF 19. TF 63. MC 70. MC 77. MC 84. MC 158. MC 13. TF 20. TF 64. MC 71. MC 78. MC 85. MC 230. C 14. TF 35. TF 65. MC 72. MC 79. MC 86. MC 231. C 15. TF 36. TF 66. MC 73. MC 80. MC 87. MC 232. C 16. TF 37. TF 67. MC 74. MC 81. MC 155. MC 17. TF 61. MC 68. MC 75. MC 82. MC 156. MC 18. TF 62. MC 69. MC 76. MC 83. MC 157. MC Accounting in Action FOR INSTRUCTOR USE ONLY 1 - 3 SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE Learning Objective 3 21. TF 91. MC 98. MC 105. MC 114. MC 190. Ex 197. Ex 22. TF 92. MC 99. MC 106. MC 159. MC 191. Ex 198. Ex 23. TF 93. MC 100. MC 107. MC 179. BE 192. Ex 199. Ex 38. TF 94. MC 101. MC 108. MC 180. BE 193. Ex 200. Ex 88. MC 95. MC 102. MC 109. MC 181. BE 194. Ex 233. C 89. MC 96. MC 103. MC 110. MC 182. BE 195. Ex 234. C 90. MC 97. MC 104. MC 111. MC 183. BE 196. Ex Learning Objective 4 24. TF 112. MC 118. MC 161. MC 200. Ex 205. Ex 210. Ex 25. TF 113. MC 119. MC 184. BE 201. Ex 206. Ex 211. Ex 26. TF 115. MC 120. MC 189. Ex 202. Ex 207. Ex 212. Ex 27. TF 116. MC 121. MC 198. Ex 203. Ex 208. Ex 39. TF 117. MC 160. MC 199. Ex 204. Ex 209. Ex Learning Objective 5 28. TF 127. MC 135. MC 143. MC 151. MC 215. Ex 223. Ex 29. TF 128. MC 136. MC 144. MC 162. MC 216. Ex 224. Ex 40. TF 129. MC 137. MC 145. MC 185. BE 217. Ex 225. Ex 122. MC 130. MC 138. MC 146. MC 186. BE 218. Ex 235. C 123. MC 131. MC 139. MC 147. MC 187. BE 219. Ex 124. MC 132. MC 140. MC 148. MC 188. BE 220. Ex 125. MC 133. MC 141. MC 149. MC 213. Ex 221. Ex 126. MC 134. MC 142. MC 150. MC 214. Ex 222. Ex Learning Objective 6 a30. TF a32. TF a56. MC a58. MC a31. TF a55. MC a57. MC a163. MC Learning Objective 7 164. MC 166. MC 168. MC 170. MC 172. MC 174. MC 176. MC 165. MC 167. MC 169. MC 171. MC 173. MC 175. MC 177. MC Note: TF = True-False BE = Brief Exercise C = Completion MC = Multiple Choice Ex = Exercise This chapter also contains one set of ten Matching questions and Short -Answer Essay questions. A summary table of all lear ning outcomes, including AACSB, AICPA, and IMA professional standards, is available on the Weygandt Accounting Principles 12e instructor web site. Test Bank for Accounting Principles, Twelfth Edition FOR INSTRUCTOR USE ONLY 1 - 4 CHAPTER LEARNING OBJECTIVES 1. Identify the activities and use rs associated with accounting . Account ing 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 information 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 money 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 inclu de 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 owner (s) and other economic entities . 3. State the accounting equation , and define its components. The basic accounting equation is: Assets = Liabilities + Owner's Equity Assets are resources owned by a business. Liabilities are creditorship claims on total assets. Owner's equity is the own ership claim on total assets. The expanded accounting equation is: Assets = Liabilities + Owner's Capital − Owner's Drawings + Revenue s − Expenses Owner's Capital is assets the owner puts into the business. Owner's drawings are the Assets the owner withd raws for personal use. Revenues are increases in assets resulting from income -earning activities. Expenses are the costs of assets consumed of services used in the process of earning revenue. 4. Analyze the effect s of business transactions on the accountin g 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 i n owner's 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 specific period of time. An owner's equity statement summarizes the ch anges in owner's equity for a specific period of time. A balance sheet reports the assets, liabilities, and owner's equity at a specific date. A statement of cash flows summarizes information 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, and forensic accounting. Accounting is a popular major because there are many different types of jobs, with unlimited potential for career advancement. Accounting in Action FOR INSTRUCTOR USE ONLY 1 - 5 TRUE -FALSE STATEMENTS 1. Owners of business firms are the only people who need accounting information. 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 Think ing 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 A ICPA 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 AI CPA 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 A ICPA 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: Rep orting 8. Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process. Ans: F LO1 BT: C Difficulty: Easy TOT: .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: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 10. The study o f accounting is not useful for a business career unless your career objective is to become an accountant. Ans: F LO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 11. A wo rking knowledge of accounting is not relevant to a lawyer or an architect. Ans: F LO1 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 LO 2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 13. The economic entity assumption requires that the activities of an entity be kept separate and disti nct from the activities of its owner and all other economic entities. Ans: T LO 2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 14. The monetary unit assumption states tha t transactions that can be measured in terms of money should be recorded in the accounting records. Ans: T LO 2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Test Bank for Accounting Principles, Twelfth Edition FOR INSTRUCTOR USE ONLY 1 - 6 15. Accounta nts rely on a fundamental business concept —ethical behavior —in reporting financial information. Ans: T LO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 16. The primary ac counting 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: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 17. The Fina ncial 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 Exch ange 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 mark et 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 AICPA BB: Critical Thinking AICPA FN: Reporting 20. Even though a part nership 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: C ritical 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 TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AI CPA 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 owner's equity by an equal amount. Ans: F LO4 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 27. The purc hase 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 s tatement 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 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Repo rting Accounting in Action 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: Reporti ng a30. 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 Thinking AICPA BB: Critical Thinking AICPA FN: Reporting a31. 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 Thinking AICPA FN: Reporting a32. Expre ssing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs. Ans: T LO 6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Repo rting 33. 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: Critical Thinking AICPA FN: Reporting 34. 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. AACSB: Reflective Thinking AICPA BB: Critic al Thinking AICPA FN: Reporting 35. 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 36. 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 37. The monetary unit assumption requires that all dollar amoun ts 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 38. The basic accounting equation is in balance when the creditor and owners hip 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 39. External transactions involve economic events between the c ompany 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 40. In the owner's equity statement, revenues are listed first, follow ed 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 Answers to True -False Statements Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 1. F 7. T 13. T 19. F 25. F a31. F 37. F 2. T 8. F 14. T 20. T 26. F a32. T 38. T 3. F 9. T 15. T 21. F 27. T 33. F 39. T 4. F 10. F 16. F 22. F 28. T 34. F 40. F 5. T 11. F 17. F 23. F 29. F 35. F 6. F 12. T 18. T 24. T a30. F 36. T Test Bank for Accounting Principles, Twelfth Edition FOR INSTRUCTOR USE ONLY 1 - 8 MULTIPLE CHOICE QUESTIONS 41. 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 42. The starting point of the accounting process is a. communicating information to users . b. identifying economic events . c. recording economic 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 43. Communication of economic events is the part of the accounting process that involves a. identifying economic events. b. quantifyi ng 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: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 44. 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. Paymen t of income taxes. Ans: a LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 45. Interpretation of reported 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: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 46. 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 preparing financial reports. c. recording nonquantifiable 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: Reporting 47. The accounting process is correctly sequenced as a. identific ation, 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 Accounting in Action FOR INSTRUCTOR USE ONLY 1 - 9 48. 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 49. Which of the following would not be considered an internal user of account ing data for the LMN 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 Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 50. Which of the following would not be considered an external use r of accounting data for the LMN Company? a. Internal Revenue Service Agent . b. Management . c. Creditors . d. Customers . Ans: b LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Ref lective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 51. 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 com pany . 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 52. Which of the following is an external user of accounting information? a. Labo r unions . b. Finance direct ors. c. Company office rs. d. Managers . Ans: a LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 53. Which one of the following is not an external user of accounting information ? a. Regulatory agencies . b. Customers . c. Investors . d. All of these answers choices are external users . Ans: d LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking A ICPA FN: Reporting 54. Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process? a. Identification . b. Communication . c. Recording . d. Analysis . Test Bank for Accounting Principles, Twelfth Edition FOR INSTRUCTOR USE ONLY 1 - 10 Ans: c LO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting a55. All of the following are services offered by public accountants except a. budgeting. b. auditing. c. tax planning. d. consulting. Ans: a LO6 BT: K Difficult y: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting a56. Which list below best describes the major services performed by public accountants? a. Bookkeeping, mergers, budgets . b. Employee training, aud iting, bookkeeping . c. Auditing, taxation, management consulting . d. Cost accounting, production scheduling, recruiting . Ans: c LO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Repor ting a57. Preparing tax returns and engaging in tax planning is performed by a. public accountants only. b. private accountants only. c. both public and private accountants. d. IRS accountants only. Ans: c LO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting a58. A private accountant can perform many activities in a business organization but would not work in a. budgeting. b. accounting information systems. c. external auditi ng. d. tax accounting. Ans: c LO6 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 59. The origins of accounting are generally attributed to the work of a. Christopher Columbu s. 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 60. Financial accounting provides economic and financ ial 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 61. 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 stakeholders . d. recognize th e ethical issues involved . Ans: c LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Accounting in Action FOR INSTRUCTOR USE ONLY 1 - 11 62. The first step in solving an ethical dilemma is to a. identify and analyze the prin cipal 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: Easy TOT: 1.0 min. AA CSB: Ethics AICPA BB: Critical Thinking AICPA FN: Reporting 63. 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 answer choices are correct . Ans: d LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Ethics AICPA BB: Critical Thinking AICPA FN: Reporting 64. Generally accepted accounting principles are a. income tax regulations of the Internal Revenue Service. b. standards that indicate 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 AICPA BB: Critical Thinking AICPA FN: Reporting 65. 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 66. The historical 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 operations. 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 67. 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 68. The private sector organization invo lved in 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 Test Bank for Accounting Principles, Twelfth Edition FOR INSTRUCTOR USE ONLY 1 - 12 69. The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles . It is true that a. they are bot h governmental 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 Difficu lty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 70. GAAP stands for a. Generally Accepted Auditing Procedures. b. Generally Accepted Accounting Principles. c. Generally Accepted Auditing Princip les. 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 71. Financial information that is capable of making a difference in a decision 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 72. The Du lce Com pany has five plants nationwide that cost a total of $200 million. The current fair value of the plants is $ 600 million. The plants will be recorded and reported as assets at a. $200 million. b. $600 million. c. $400 million. d. $800 million. Ans: a LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 73. 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 74. The proprietorship form of business organization a. must have at least three owners in most states. b. represents the lar gest number 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 Diffi culty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 75. 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. Accounting in Action FOR INSTRUCTOR USE ONLY 1 - 13 Ans: d LO2 BT: K Di fficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 76. A business organized as a corporation a. is not a separate legal entity in most states. b. requires that stockholders be personally liable for the 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: Repo rting 77. 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 78. Which of the following is not an advantage of the corporate form of business organization? a. Limited liability of stockholders b. Transferability of ownershi p 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 79. A small neighborhood barber shop that is o perated 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: Report ing 80. George and Ringo met at law school and decide to start a small law practice after graduation . They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a a. joint venture. b. partnership. c. corporation. d. proprietorship. Ans: b LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 81. Which of the following is true regarding the corporate form of business organization? a. Corporations are the most prevalent form of business organization. b. Corporate businesses are generally smaller in size than partnerships and proprietor - ships. c. The revenues of corporations are greater than the combined rev enues of partnerships and proprietorships. d. Corporations are separate legal entities organized exclusively under federal law. Ans: c LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Test Bank for Accounting Principles, Twelfth Edition FOR INSTRUCTOR USE ONLY 1 - 14 82. A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the a. stand alone concept. b. monetary unit assumption. c. corporate form of ownership. d. economi c entity assumption. Ans: d LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 83. Sam Ryo is the proprietor (owner) of Sam's , a retailer of golf apparel. When recording the financial transactions of Sam's , Sam does not r ecord an entry for a car he purchased for personal use. Sam took out a personal loan to pay for the car. What accounting concept guides Sam's behavior in this situation? a. Pay back concept b. Economic entity assumption c. Cash basis concept d. Monetary unit assumption Ans: b LO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 84. A basic assumption of accounting assumes that the dollar is a. unrelated to business transactions. b. a poor measure of economic activities. c. the common unit of measure for all business transactions. d. useless in measuring an economic event. Ans: c LO2 BT: K Difficulty: Easy TOT: 1.0 min. A ACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 85. The assumption that the unit of measure remains sufficiently constant over time is part of the a. economic entity assumption. b. cost principle. c. historical cost princip le. d. monetary unit assumption. Ans: d LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 86. A business whose owners enjoy limited liability is a a. proprietorship. b. partnership. c. corporation. d. sole proprietorship. Ans: c LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 87. A problem with the monetary unit assumption is that a. the do llar has not been stable over time. b. the dollar has been stable over time. c. the dollar is a common medium of exchange. d. it is impossible to account for international transactions. Ans: a LO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Refl ective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 88. The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit. Accounting in Action FOR INSTRUCTOR USE ONLY 1 - 15 Ans: d LO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 89. Owner's equity is best depicted by the following: a. Assets = Liabilities. b. Liabilities + Assets. c. Residual equity + Assets. d. Assets – Liabilities. Ans: d LO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 90. The basic accounting equation may be expressed as a. Assets = Equities. b. Assets – Liabilities = Owner's Equi ty. c. Assets = Liabilities + Owner's Equity. d. All of these answer choices are correct. . Ans: d LO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 91. Liabilities a. are future economic benefits. b. are existing debts and obligations. c. possess service potential. d. are things of value used by the business in its operation. Ans: b LO3 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Cr itical Thinking AICPA FN: Reporting 92. Liabilities of a company would not include a. notes payable. b. accounts payable. c. salaries and wages payable. d. cash. Ans: d LO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking A ICPA BB: Critical Thinking AICPA FN: Reporting 93. Liabilities of a company are owed to a. debtors. b. benefactors. c. creditors. d. underwriters. Ans: c LO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critic al Thinking AICPA FN: Reporting 94. Owner's equity can be described as a. creditorship claim on total assets. b. ownership claim on total assets. c. benefactor's claim on total assets. d. debtor claim on total assets. Ans: b LO3 BT: C Difficult y: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting 95. Owner's equity is often referred to as a. residual equity. b. leftovers. c. spoils. d. second equity. Ans: a LO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting