95 test bank for fundamental accounting principles 21st edition

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95 Test Bank for Fundamental Accounting Principles 21st Edition

by Wild Multiple Choice Questions

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.

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 thefollowing 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 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.

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.

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

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.

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

1 A Monetary unit assumption.

2 B Going-concern assumption.

3 C Cost principle.

4 D Business entity assumption.

5 E Revenue recognition principle.

External users of accounting information include all of the following except:

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.

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 private group that currently has the authority to establish

generally accepted accounting principles in the United States is the:

2 B Monetary unit assumption.

3 C Business entity assumption.

4 D Going-concern assumption.

5 E Revenue recognition principle.

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,

5 E Business entity assumption.

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.

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.

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.

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.

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:

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.

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 issold for $137,000, the land should be recorded in the purchaser's books at:

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 onthe 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.

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 At the time of the sale, assume that the seller still owed $30,000 to TrustOne Bank on the land that was purchased for $85,000 Immediately after the sale, the seller paid off the loan to TrustOne Bank What is the effect of the sale and the payoff of the loan on the accounting equatio

1 A Assets increase $52,000; owner's equity increases $22,000; liabilities decrease $30,000

2 B Assets increase $52,000; owner's equity increases $30,000; liabilities decrease $30,000

3 C Assets increase $22,000; owner's equity increases $52,000; liabilities decrease $30,000

4 D Assets decrease $30,000; owner's equity decreases $30,000; liabilities decrease $30,000

5 E Assets decrease $55,000; owner's equity decreases $55,000; liabilities decrease $30,000

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.

The area of accounting aimed at serving the decision making needs

of internal users is:

1 A Financial accounting.

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

1 A AICPA.

2 B IASB.

3 C CAP.

4 D SEC.

5 E FASB.

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.

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.

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 question of when revenue should be recognized on the income statement (according to GAAP) is addressed by the:

1 A Revenue recognition principle.

95 Free Test Bank for Fundamental Accounting

Principles 21st Edition by Wild Multiple Choice

Questions - Part 2

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.

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

1 A Liability.

2 B Withdrawal.

3 C Expense.

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.

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.

Viscount Company collected $42,000 cash on its accounts

receivable The effects of this transaction as reflected in the

accounting equation are:

1 A Total assets decrease and equity increases.

2 B Both total assets and total liabilities decrease.

3 C Total assets, total liabilities, and equity are unchanged.

4 D Both total assets and equity are unchanged and liabilities increase.

5 E Total assets increase and equity decreases.

Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000 It buys office equipment on credit for $75,000 What would be the effects of this transaction on the accounting equation?

1 A Assets increase by $75,000 and expenses increase by $75,000.

2 B Assets increase by $75,000 and expenses decrease by $75,000.

3 C Liabilities increase by $75,000 and expenses decrease by $75,000.

4 D Assets decrease by $75,000 and expenses decrease by $75,000.

5 E Assets increase by $75,000 and liabilities increase by $75,000.

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.

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 company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities, and equity?

1 A Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.

2 B Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000.

3 C Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change.

4 D There would be no effect on the accounts because the accounts are

affected by the same amount.

5 E None of these.

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.

If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have:

Reston had income of $150 million and average invested assets of

$1,800 million Its return on assets is:

An example of an investing activity is:

1 A Paying wages of employees.

2 B Withdrawals by the owner.

4 D Are also called asset management.

5 E Are also called strategic management.

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

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:

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?

1 A Assets would have increased $55,000.

2 B Assets would have decreased $55,000.

3 C Assets would have increased $19,000.

4 D Assets would have decreased $19,000.

An exchange of value between two entities is called:

1 A The accounting equation.

2 B Recordkeeping or bookkeeping.

3 C An external transaction.

4 D An asset.

5 E Net Income.

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.

95 Free Test Bank for Fundamental Accounting

Principles 21st Edition by Wild Multiple Choice

Questions - Part 3

Della's Donuts owner made investments of $50,000 and

withdrawals of $20,000 The company has revenues of $83,000 andexpenses of $64,000 Calculate its net income

U S government bonds are:

1 A High-risk and high-return investments.

2 B Low-risk and low-return investments.

3 C High-risk and low-return investments.

4 D Low-risk and high-return investments.