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104 Test Bank for Accounting Principles 6th

Edition by Weygandt Multiple Choice Questions

ASPE requires less information on the financial statements of private companies than IFRS requires because

1. a private companies are smaller than public companies

2. b users of private company financial statements have the ability to obtain additional information from the company if required

3. c public companies have their information available on the internet

4. d public companies may report in different foreign currencies

An external user could be

1. a employees

3. c Canada Revenue Agency

4. d the human resource director

Which of the following would best be described as an ownership claim on a company’s assets?

1. a Assets – Liabilities = Owner's Equity

2. b Assets – Owner's Equity = Liabilities

3. c Owner's Equity + Liabilities = Assets

4. d Assets + Liabilities = Owner's Equity.

Emily Hogan recently opened a new business The business has been very successful and as a reward for all her hard work Emily spent a day at the local spa Emily paid for the spa using a

company credit card and charged the amount to the expense account called Repairs and Maintenance expense Emily’s

actions violated which of the following?

1. a The going concern assumption

2. b The monetary unit assumption

3. c The cost principle

4. d The economic entity concept

The International Accounting Standards Board

1. a works to reduce differences in accounting practices across countries

2. b promotes unique accounting applications

3. c works to increase differences in accounting practices across countries

4. d only operates in countries which speak English

Evan Guanzon owns and operates Guanzon’s Pizza Express Evan should record the cost of wages paid to store employees as

GAAP stands for

1. a Generally Accepted Auditing Procedures

2. b Generally Accepted Accounting Principles

3. c Generally Accepted Auditing Principles.

4. d Generally Accepted Accounting Procedures

In a proprietorship, owner’s equity is affected by all of the

following EXCEPT

1. a the investment of cash by the owners

2. b the purchase of a personal automobile by the owner using personal funds

3. c the purchase of a computer for the owner’s son using cash generated by the business

4. d the sale of goods by the business

Which of the following is true when considering the accounting equation?

1. a An increase in an asset must always equal a decrease in a liability

2. b For every transaction an asset and a liability must be affected

3. c An increase in a liability must equal a decrease in owner’s equity

4. d An increase in an asset may result in a decrease in another asset

Sources of increases to owner's equity, in a proprietorship, are

1. a additional investments by owners

2. b purchases of merchandise

3. c withdrawals by the owner

4. d sale of share capital

All of the following are steps used to analyze ethical dilemmas EXCEPT

1. a using the organization’s code of ethics to identify ethical situations

2. b using personal ethics to identify ethical situations

3. c identifying potential stakeholders

4. d discussing the ethical dilemma with co-workers.

An external user would NOT include

1. a A creditor of the company

3. c An employee

4. d The company’s bank

Which of the following is true regarding the corporate form of business organization?

1. a Corporations are the most prevalent form of business organization

2. b Corporate businesses are generally smaller in size than partnerships andproprietor-ships

3. c The revenues of corporations are greater than the combined revenues ofpartnerships and proprietorships

4. d Corporations are separate legal entities organized exclusively under federal law

The accounting equation, for a corporation, is best expressed as

1. a Assets = Liabilities + Shareholders' Equity

2. b Assets – Liabilities = Partner’s Equity

3. c Assets = Liabilities + Owner's Equity

4. d all of these

The accounting equation, for a proprietorship, may be expressed

as

1. a Assets = Liabilities + Shareholders' Equity

2. b Assets – Liabilities = Partners' Equity

3. c Assets = Liabilities + Owner's Equity

4. d all of these

Canadian Accounting Standards allow a choice of whether or not

to use International Financial Reporting Standards for which type

of company?

1. a Public companies

2. b Only small private companies

4. d All private companies in Canada

When an owner, in a proprietorship or partnership, withdraws cash or other assets from a business for personal use, these withdrawals are termed

3. c Statement of Owner’s Equity

4. d Cash Flow Statement

Judy and Marilyn 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(n)

1. a non profit organization

2. b partnership

3. c corporation.

4. d proprietorship

The main objective of the financial statements is

1. a to show the profit of a company

2. b to allow customers to determine whether a company will honour its product warranties

3. c to provide useful information to investors and creditors to make decisionsabout a business

4. d to determine how many employees the company can afford to hire each year

Owner's equity is often referred to as

1. a residual equity

2. b leftovers

3. c spoils

4. d a second equity

The partnership form of business organization

1. a is a separate legal entity

2. b is a common form of organization for service-type businesses

3. c enjoys an unlimited life

4. d has limited liability

Owner's equity, in a proprietorship, is increased by

1. a drawings

2. b revenues

3. c expenses

4. d liabilities

Which of the following forms of business organizations typically have their shares listed on the Toronto Stock Exchange?

4. d future economic benefit

Which of the following is NOT an advantage of the corporate form

Generally accepted accounting principles are

1. a income tax regulations

2. b standards that indicate how to report economic events

3. c theories that are based on physical laws of the universe

4. d principles that have been proven correct by academic researchers

The proprietorship form of business organization

1. a must have at least three owners in most provinces

2. b represents the largest number of businesses in Canada.

3. c combines the records of the business with the personal records of the owner

4. d is characterized by a legal distinction between the business as an

economic unit and the owner

Which of the following would NOT be considered an internal user

of accounting data for the ABC Company?

1. a President of the company

2. b Production manager

3. c Merchandise inventory clerk

4. d President of the employees' labour union

A business organized as a corporation

1. a is not a separate legal entity in most provinces

2. b requires that shareholders be personally liable for the debts of the business

3. c is owned by its shareholders

4. d terminates when one of its original shareholders dies

Liabilities

1. a are future economic benefits

2. b are current or long term obligations arising from past events

3. c possess service potential

4. d are things of value used by the business in its operation

Revenues would NOT result from

1. a sale of merchandise

2. b initial investment of cash by owner

3. c performance of services.

4. d rental of property to a tenant

An account receivable is recorded in the accounting records as a(n)

1. a liability

2. b expense

3. c asset

4. d revenue

Bing Company has total liabilities of $10,000 and total assets of

$15,000 Based on this information, Bing Company’s owner’s equity must be

1. a $10,000

2. b $ 0

3. c $5,000

4. d $15,000

The going concern assumption

1. a states that a company will not operate long enough to utilize assets and fulfill obligations

2. b assumes the company will continue to operate in the foreseeable future

3. c is inconsistent with the cost principle

4. d states that net worth is the most appropriate value at which to record assets

Which of the following principles or assumptions requires that the activities of a business be kept distinct from those of its

owner(s)?

1. a economic entity concept

2. b going concern assumption

3. c monetary unit assumption

Mel Green is the proprietor (owner) of Green's, a retailer of

athletic apparel When recording the financial transactions of Green's, Mel does not record an entry for a car he purchased for personal use Mel took out a personal loan to pay for the car What accounting assumption guides Mel's behaviour in this

situation?

1. a going concern assumption

2. b economic entity concept

3. c time period assumption

4. d monetary unit assumption

104 Free Test Bank for Accounting Principles 6th

Canadian Edition by Weygandt Multiple Choice

Questions - Page 2

Which of the following is an example of an economic event that should be recorded as an accounting transaction?

1. a the purchase of supplies

2. b the signing of a contract to build a new corporate headquarters

3. c the appointment of a new Chief Executive Officer

4. d the launch of a new marketing strategy

Ingrid Ltd and Bulgar Equipment rentals company sign a contract

to rent equipment in the next two years What is the impact on the accounting equation?

1. a Assets increase and liabilities increase

2. b Assets decrease and liabilities decrease

3. c No impact on the accounting equation

4. d Owner’s equity increases and assets decrease

Revenues, in a proprietorship, are

1. a the cost of assets consumed during the period

2. b the gross increases in owner's equity resulting from business activities

3. c the cost of services used during the period

4. d actual or expected cash outflows

A basic assumption of accounting assumes that the dollar is

1. a unrelated to business transactions

2. b a poor measure of economic activities

3. c the common unit of measure for all business transactions

4. d useless in measuring an economic event

The Income Statement is sometimes referred to as

1. a a Statement of Earnings

2. b the Statement of Financial Position

3. c the Cash Flow Statement.

4. d the Statement of Owner's Equity

Owner's equity, in a proprietorship, at the end of the period is equal to

1. a owner's capital at the beginning of the period plus profit minus liabilities

2. b owner's capital at the beginning of the period plus profit minus drawings

3. c profit

4. d assets plus liabilities

Which of the following groups uses accounting information

primarily to ensure the entity is operating within prescribed rules?

1. a a liability will increase

2. b an asset will increase

3. c owner's equity will decrease

4. d owner's equity will increase

If total liabilities increased by $5,000, then

1. a assets must have decreased by $5,000

2. b owner's equity must have increased by $5,000

3. c assets must have increased by $5,000, or owner's equity must have decreased by $5,000

4. d assets and owner's equity each increased by $2,500.

Owner's equity, in a proprietorship, is decreased by

Recognition in the accounting terminology means

1. a recognizing the difference between assets and liabilities

2. b recognizing the difference between income and expenses

3. c recognizing that initially transactions are recorded at fair value

4. d the process of recording a transaction in the accounting records.

If a company reported a loss in the first month of operations, the loss would reduce owner’s capital and would be

1. a added in the same section as owner’s investments

2. b deducted in the same section as owner’s investments

3. c deducted in the same section as owner’s drawings

4. d added in the same section as owner’s drawings

If services are provided for credit, in a proprietorship, then

1. a assets will decrease

2. b liabilities will increase

3. c owner's equity will increase

4. d liabilities will decrease

Which of the following would NOT affect owner’s equity?

1. a a cash receipt from a customer in payment of account

2. b payment of an expense

3. c services provided for cash

4. d withdrawal of funds for personal use

The cost principle requires that when assets are acquired, they be recorded at

1. a appraisal value

2. b the amount paid

3. c the amount the asset could be sold for

4. d list price

Jackson's Small Engine Repair Shop, a proprietorship, started the year with total assets of $60,000 and total liabilities of $40,000

During the year, the business recorded $100,000 in repair

revenues, $55,000 in expenses, and Mike Jackson, the owner, withdrew $10,000 Jackson's Capital balance at the end of the year was

1. a $55,000

2. b $35,000

3. c $65,000

4. d $45,000

If an individual asset, in a proprietorship, is increased, then

1. a there may be an equal decrease in a specific liability

2. b there may be an equal decrease in owner's equity

3. c there may be an equal decrease in another asset

4. d none of these is possible

The cost of advertising purchased for the month is considered an expense, not an asset because

1. a the expense will generate future benefits

2. b the advertising will generate future cash inflows

3. c the benefits of the expense have already been used

4. d the expense has not yet been used

Partners' equity, in a partnership, is decreased by

If expenses, in a proprietorship, are paid in cash, then

1. a assets will increase

2. b liabilities will decrease

3. c owner's equity will increase

4. d assets will decrease

Jackson's Small Engine Repair Shop, a proprietorship, started the year with total assets of $60,000 and total liabilities of $40,000 During the year, the business recorded $100,000 in repair

revenues, $55,000 in expenses, and Mike Jackson, the owner, withdrew $10,000 The profit reported by Jackson's Small Engine Repair Shop for the year was

1. a summarizes the changes in owner's equity for a specific period of time.

2. b reports the changes in assets, liabilities, and owner's equity over a period

of time

3. c reports the assets, liabilities, and owner's equity at a specific date

4. d presents the revenues and expenses for a specific period of time

Collection of a $600 Accounts Receivable

1. a increases an asset $600; decreases an asset $600

2. b increases an asset $600; decreases a liability $600

3. c decreases a liability $600; increases owner's equity $600

4. d decreases an asset $600; decreases a liability $600

Shareholders' equity, in a corporation, at the end of the period is equal to

1. a shareholders' equity at the beginning of the period plus profit minus liabilities

2. b share capital plus retained earnings

3. c share capital plus dividends

4. d share capital plus this year's profit

The income statement is always prepared first in order to

determine

1. a the total assets to be reported on the balance sheet

2. b the cash outflow of the company

3. c the profit or loss used in the statement of changes in owner’s equity

4. d the amount of investments or withdrawals used in the statement of changes in owner’s equity

A balance sheet, in a proprietorship, shows

1. a revenues, liabilities, and owner's equity