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Trang 1104 Test Bank for Accounting Principles 6th
Edition by Weygandt Multiple Choice Questions - Page 1
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
When an owner, in a proprietorship or partnership, withdraws cash
or other assets from a business for personal use, these withdrawals are termed
1. a expenses
2. b salary
3. c drawings
4. d a credit line
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 and proprietor-ships
3. c The revenues of corporations are greater than the combined revenues of partnerships and proprietorships
4. d Corporations are separate legal entities organized exclusively under federal law
Withdrawal of cash from a business by the owner for personal
reasons will NOT affect which financial statement?
1. a Balance Sheet
2. b Income Statement
3. c Statement of Owner’s Equity
4. d Cash Flow Statement
In a proprietorship, owner’s equity is affected by all of the following EXCEPT
Trang 21. 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 would best be described as an ownership claim on a company’s assets?
1. a expenses
2. b account receivable from the owner
3. c owner’s equity
4. d liabilities
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
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
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
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
The common characteristic possessed by all assets is
1. a long life
2. b great monetary value
3. c tangible nature
4. d future economic benefit
Trang 3Sources 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
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
3. c Banks
4. d All private companies in Canada
An external user could be
1. a employees
2. b management
3. c Canada Revenue Agency
4. d the human resource director
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
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 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
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
Trang 42. b $ 0.
3. c $5,000
4. d $15,000
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 is NOT an advantage of the corporate form
of business organization?
1. a limited liability of shareholders
2. b transferability of ownership
3. c unlimited personal liability for shareholders
4. d unlimited life
An account receivable is recorded in the accounting records as a(n)
1. a liability
2. b expense
3. c asset
4. d revenue
Which of the following forms of business organizations typically have their shares listed on the Toronto Stock Exchange?
1. a Proprietorships
2. b Private companies
3. c Public companies
4. d Partnerships
Evan Guanzon owns and operates Guanzon’s Pizza Express Evan should record the cost of wages paid to store employees as a (an)
1. a revenue
2. b expense
3. c liability
4. d asset
Owner's equity, in a proprietorship, is increased by
1. a drawings
2. b revenues
3. c expenses
4. d liabilities
Trang 5Which 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
4. d cost principle
The basic accounting equation, in a proprietorship, CANNOT be restated as
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
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 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
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
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
Trang 6Owner's equity is often referred to as
1. a residual equity
2. b leftovers
3. c spoils
4. d a second equity
An external user would NOT include
1. a A creditor of the company
2. b Canada Revenue Agency
3. c An employee
4. d The company’s bank
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
Which of the following would violate the economic entity concept?
1. a reporting amounts owed to the company’s suppliers as a liability on the balance sheet
2. b reporting equipment owned and used in the business as an asset in the balance sheet
3. c reporting withdrawals by the owner as a drawing in the statement of
owner’s equity
4. d reporting the owner’s personal sailboat as an asset on the balance sheet
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
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 decisions about a business
4. d to determine how many employees the company can afford to hire each year
A business organized as a corporation
1. a is not a separate legal entity in most provinces
Trang 72. 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
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
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
If supplies that have been purchased are used in the course of business, then
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 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
The income statement is prepared from the data in the
1. a assets column
2. b liabilities column
3. c owner’s equity column
4. d liabilities and owner’s equity column
Trang 8An Income Statement
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
External users of accounting information include all of the following except:
1. a) tax authorities
2. b) creditors
3. c) the chief financial officer
4. d) regulatory authorities
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
Payment of a liability for an expense that has been previously
recorded
1. a does not affect the owner’s equity account
2. b only affects the liability accounts
3. c does not affect the asset accounts
4. d only affects the asset accounts
Partners' equity, in a partnership, is decreased by
1. a payment of dividends
2. b drawings
3. c owner's investments
4. d revenues
Shareholders' equity, in a corporation, is increased by
1. a an expense
2. b shareholder purchase of common shares
3. c payment of dividends
4. d liabilities
The primary purpose of the Cash Flow Statement is to report
1. a a company's investing transactions
2. b a company's financing transactions
3. c information about cash inflows and cash outflows of a company
4. d the net increase or decrease in cash
Trang 9If 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
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 changed by what amount from the beginning of the year to the end of the year?
1. a $10,000
2. b $45,000
3. c $20,000
4. d $35,000
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
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
Which of the following statements is correct in regards to the order
of preparing financial statements?
1. a Income statement, Balance sheet, Statement of changes in owner’s equity, Cash flow statement
2. b Balance sheet, Income statement, Cash flow statement, Statement of changes in owner’s equity
3. c Income statement, Statement of changes in owner’s equity, Balance sheet, Cash flow statement
4. d Income statement, Statement of changes in owner’s equity, Cash flow statement, Balance sheet
Trang 10Shareholders' 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
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
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
Expenses do not have to be paid in cash at the time they are
incurred When payment is made on the later date, the liability accounts payable account will decrease and the asset
1. a cash will increase
2. b cash will decrease
3. c will not be affected
4. d accounts receivable will increase
Two or more items could be affected by a transaction Which of the following statements is INCORRECT?
1. a An increase in an asset may result in a decrease in another asset
2. b An increase in an asset may result in a decrease in an asset and increase
in a liability
3. c An increase in a liability may result in a decrease in an asset
4. d An increase in a liability may result in a decrease in owner’s equity
Owner's equity, in a proprietorship, is decreased by
1. a assets
2. b revenues
3. c expenses
4. d liabilities
The Income Statement is sometimes referred to as
1. a a Statement of Earnings