94 test bank for fundamental accounting principles 20th edition by wild

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94 Test Bank for Fundamental Accounting Principles 20th edition by Wild

Multiple Choice Questions

The primary objective of financial accounting is:

1 A To serve the decision-making needs of internal users.

2 B To provide financial statements to help external users analyze an

organization's activities.

3 C To monitor and control company activities.

4 D To provide information on both the costs and benefits of looking after products and services.

5 E To know what, when, and how much to produce.

The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

1 A Time-period assumption.

2 B Business entity assumption.

3 C Going-concern assumption.

4 D Revenue recognition principle.

5 E Cost principle.

The Maxim Company acquired a building for $500,000 Maxim had the building appraised, and found that the building was easily worth $575,000 The seller had paid $300,000 for the building 6 years ago Which accounting principle would require Maxim to record the building on its records at $500,000?

1 A Monetary unit assumption.

2 B Going-concern assumption.

3 C Cost principle.

4 D Business entity assumption.

5 E Revenue recognition principle.

Revenue is properly recognized:

1 A When the customer's order is received.

2 B Only if the transaction creates an account receivable.

3 C At the end of the accounting period.

4 D Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.

5 E When cash from a sale is received.

All of the following regarding a Certified Public Accountant are True except:

1 A Must meet education and experience requirements.

2 B Must pass an examination.

3 C Must exhibit ethical character.

4 D May also be a Certified Management Accountant.

5 E Cannot hold any certificate other than a CPA.

The accounting concept that requires financial statement

information to be supported by independent, unbiased evidence other than someone's belief or opinion is:

1 A Business entity assumption.

2 B Monetary unit assumption.

3 C Going-concern assumption.

4 D Time-period assumption.

5 E Objectivity.

The rule that (1) requires revenue to be recognized at the time it

is earned, (2) allows the inflow of assets associated with revenue

to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any

noncash assets received from customers in exchange for goods

or services, is called the:

1 A Going-concern assumption.

2 B Cost principle.

3 C Revenue recognition principle.

4 D Objectivity principle.

5 E Business entity assumption.

A limited partnership:

1 A Includes a general partner with unlimited liability.

2 B Is subject to double taxation.

3 C Has owners called stockholders.

4 D Is the same as a corporation.

5 E May only have two partners.

Technology

1 A Has replaced accounting.

2 B Has not changed the work that accountants do.

3 C Has closely linked accounting with consulting, planning, and other financial services.

4 D In accounting has replaced the need for decision makers.

5 E In accounting is only available to large corporations.

The area of accounting aimed at serving the decision making needs of internal users is:

1 A Financial accounting.

2 B Managerial accounting.

3 C External auditing.

4 D SEC reporting.

5 E Bookkeeping.

On December 15 of the current year, Myers Legal Services

signed a $50,000 contract with a client to provide legal services to the client in the following year Which accounting principle would require Myers Legal Services to record the legal fees revenue in the following year and not the year the cash was received?

1 A Monetary unit assumption.

2 B Going-concern assumption.

3 C Cost principle.

4 D Business entity assumption.

5 E Revenue recognition principle.

The International Accounting Standards Board (IASB)

1 A Hopes to create harmony among accounting practices of different

countries.

2 B Is the government group that establishes reporting requirements for companies that issue stock to the public.

3 C Has the authority to impose its standards on companies.

4 D Is the only source of generally accepted accounting principles (GAAP).

5 E Only applies to companies that are members of the European Union. Social responsibility:

1 A Is a concern for the impact of our actions on society.

2 B Is a code that helps in dealing with confidential information.

3 C Is required by the SEC.

4 D Requires that all businesses conduct social audits.

5 E Is limited to large companies.

Accounting is an information and measurement system that does all of the following except:

1 A Identifies business activities.

2 B Records business activities.

3 C Communicates business activities.

4 D Does not use technology to improve accuracy in reporting.

5 E Helps people make better decisions.

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

1 A Going-concern assumption.

2 B Matching principle.

3 C Cost principle.

4 D Business entity assumption.

5 E Consideration assumption.

The group that attempts to create more harmony among the accounting practices of different countries is the:

2 B IASB.

Marian Mosely is the owner of Mosely Accounting Services Which accounting principle requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services?

1 A Monetary unit assumption.

2 B Going-concern assumption.

3 C Cost principle.

4 D Business entity assumption.

5 E Matching principle.

The accounting principle that requires accounting information to

be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

1 A Accounting equation.

2 B Cost principle.

3 C Going-concern assumption.

4 D Realization principle.

5 E Business entity assumption.

The rule that requires financial statements to reflect the

assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not

continue, is the:

1 A Going-concern assumption.

2 B Business entity assumption.

3 C Objectivity principle.

4 D Cost Principle.

5 E Monetary unit assumption.

The question of when revenue should be recognized on the

income statement (according to GAAP) is addressed by the:

1 A Revenue recognition principle.

2 B Going-concern assumption.

3 C Objectivity principle.

4 D Business entity assumption.

5 E Cost principle.

External users of accounting information include all of the

following except:

1 A Shareholders.

3 C Purchasing managers.

4 D Government regulators.

5 E Creditors.

A partnership:

1 A Is also called a sole proprietorship.

2 B Has unlimited liability for its partners.

3 C Has to have a written agreement in order to be legal.

4 D Is a legal organization separate from its owners.

5 E Has owners called shareholders.

All of the following are True regarding ethics except:

1 A Ethics are beliefs that separate right from wrong.

2 B Ethics rules are often set for CPAs.

3 C Ethics do not affect the operations or outcome of a company.

4 D Are critical in accounting.

5 E Ethics can be hard to apply.

If a parcel of land that was originally acquired for $85,000 is

offered for sale at $150,000, is assessed for tax purposes at

$95,000, is recognized by its purchasers as easily being worth

$140,000, and is sold for $137,000, the land should be recorded

in the purchaser's books at:

1 A $95,000.

2 B $137,000.

3 C $138,500.

4 D $140,000.

5 E $150,000.

Which of the following accounting principles would require that all goods and services purchased be recorded at cost?

1 A Going-concern assumption.

2 B Matching principle.

3 C Cost principle.

4 D Business entity assumption.

5 E Consideration assumption.

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:

1 A Objectivity principle.

2 B Monetary unit assumption.

3 C Business entity assumption.

4 D Going-concern assumption.

5 E Revenue recognition principle.

Ethical behavior requires:

1 A That auditors' pay not depend on the success of the client's business.

2 B Auditors to invest in businesses they audit.

3 C Analysts to report information favorable to their companies.

4 D Managers to use accounting information to benefit themselves.

5 E That auditors' pay depend on the success of the client's business.

A corporation:

1 A Is a business legally separate from its owners.

2 B Is controlled by the FASB.

3 C Has shareholders who have unlimited liability for the acts of the

corporation.

4 D Is the same as a limited liability partnership.

5 E Is not subject to double taxation.

The private group that currently has the authority to establish generally accepted accounting principles in the United States is the:

2 B FASB.

94 Free Test Bank for Fundamental Accounting

Principles 20th edition by Wild Multiple Choice

Questions - Page 2

An example of an operating activity is:

1 A Paying wages.

2 B Purchasing office equipment.

3 C Borrowing money from a bank.

4 D Selling stock.

5 E Paying off a loan.

Resources that are expected to yield future benefits are:

1 A Assets.

3 C Liabilities.

4 D Owner's Equity.

5 E Expenses.

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

1 A Income statement equation.

2 B Accounting equation.

3 C Business equation.

4 D Return on equity ratio.

5 E Net income.

How would the accounting equation of Boston Company be

affected by the billing of a client for $10,000 of consulting work completed?

1 A +$10,000 accounts receivable, -$10,000 accounts payable.

2 B +$10,000 accounts receivable, +$10,000 accounts payable.

3 C +$10,000 accounts receivable, +$10,000 cash.

4 D +$10,000 accounts receivable, +$10,000 revenue.

5 E +$10,000 accounts receivable, -$10,000 revenue.

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at

$95,000, is recognized by its purchasers as easily being worth

$140,000, and is sold for $137,000 What is the effect of the sale

on the accounting equation for the seller?

1 A Assets increase $52,000; owner's equity increases $52,000.

2 B Assets increase $85,000; owner's equity increases $85,000.

3 C Assets increase $137,000; owner's equity increases $137,000.

4 D Assets increase $140,000; owner's equity increases $140,000.

5 E Assets decrease $85,000; owner's equity decreases $85,000.

Creditors' claims on the assets of a company are called:

1 A Net losses.

2 B Expenses.

4 D Equity.

5 E Liabilities.

The assets of a company total $700,000; the liabilities, $200,000 What are the claims of the owners?

1 A $900,000.

2 B $700,000.

3 C $500,000.

4 D $200,000.

5 E It is impossible to determine unless the amount of this owners'

investment is known.

An example of an investing activity is:

1 A Paying wages of employees.

2 B Withdrawals by the owner.

3 C Purchase of land.

4 D Selling inventory.

5 E Contribution from owner.

Another name for equity is:

1 A Net income.

2 B Expenses.

3 C Net assets.

5 E Net loss.

An example of a financing activity is:

1 A Buying office supplies.

2 B Obtaining a long-term loan.

3 C Buying office equipment.

4 D Selling inventory.

5 E Buying land.

Net Income:

1 A Decreases equity.

2 B Represents the amount of assets owners put into a business.

3 C Equals assets minus liabilities.

4 D Is the excess of revenues over expenses.

5 E Represents owners' claims against assets.

Revenues are:

1 A The same as net income.

2 B The excess of expenses over assets.

3 C Resources owned or controlled by a company.

4 D The increase in equity from a company's earning activities.

5 E The costs of assets or services used.

The difference between a company's assets and its liabilities, or net assets is:

1 A Net income.

3 C Equity.

5 E Net loss.

If assets are $99,000 and liabilities are $32,000, then equity

equals:

1 A $32,000.

2 B $67,000.

3 C $99,000.

4 D $131,000.

5 E $198,000.

Distributions of assets by a business to its owners are called:

1 A Withdrawals.

2 B Expenses.

3 C Assets.

4 D Retained earnings.

5 E Net Income.

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at

$95,000, is recognized by its purchasers as easily being worth

$140,000, and is sold for $137,000, the land account transaction amount to handle the sale of the land in the seller's books is:

1 A $85,000 increase.

2 B $85,000 decrease.

3 C $137,000 increase.

4 D $137,000 decrease.

5 E $140,000 decrease.

Operating activities:

1 A Are the means organizations use to pay for resources like land, buildings and equipment.

2 B Involve using resources to research, develop, purchase, produce,

distribute and market products and services.

3 C Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.

4 D Are also called asset management.

5 E Are also called strategic management.

A payment to an owner is called a(n):

1 A Liability.

2 B Withdrawal.

4 D Contribution.

5 E Investment.

If equity is $300,000 and liabilities are $192,000, then assets

equal:

1 A $108,000.

2 B $192,000.

3 C $300,000.

4 D $492,000.

5 E $792,000.

Photometer Company paid off $30,000 of its accounts payable in cash What would be the effects of this transaction on the

accounting equation?

1 A Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.

2 B Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.

3 C Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.

4 D Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.

5 E Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease. Decreases in equity that represent costs of assets or services used to earn revenues are called:

1 A Liabilities.

2 B Equity.

3 C Withdrawals.

4 D Expenses.

5 E Owner's Investment.

On June 30 of the current year, the assets and liabilities of

Phoenix, Inc are as follows: Cash $20,500; Accounts Receivable,

$7,250; Supplies, $650; Equipment, $12,000; Accounts Payable,

$9,300 What is the amount of owner's equity as of July 1 of the current year?

1 A $8,300

2 B $13,050

3 C $20,500

4 D $31,100