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104 Test Bank for Accounting Principles 6th

Edition by Weygandt

Multiple Choice Questions

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

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 a (an)

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

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

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

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

3. c corporation.

4. d proprietorship

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

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

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

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.

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

An external user could be

1. a employees

2. b management

3. c Canada Revenue Agency

4. d the human resource director

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

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

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

Owner's equity is often referred to as

1. a residual equity

1. a economic entity concept

2. b going concern assumption

3. c monetary unit assumption

4. d cost principle

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

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

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 Merchandise inventory clerk

4. d President of the employees' labour union

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

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 federallaw

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

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

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

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

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

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

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

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

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

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

104 Free Test Bank for Accounting Principles 6th

Canadian Edition by Weygandt Multiple Choice

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?

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

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

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

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

If an owner makes a withdrawal of cash from a proprietorship, then

1. a there has been a violation of accounting principles

2. b assets will decrease and owner's equity will increase

3. c assets will decrease and owner's equity will decrease

4. d assets will decrease and liabilities will increase

An 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 oftime

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.

An investment by a company’s owner increases a company’s cash and

1. a reduces its liabilities

2. b reduces a company’s total assets

3. c increases owner’s equity

4. d increases the company’s net earnings in the year in which the investment ismade

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?

2. b share capital plus retained earnings

3. c share capital plus dividends

4. d share capital plus this year's profit

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

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

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

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

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

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

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

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

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

Profit results when

1. a Assets > Liabilities

2. b Revenues = Expenses

3. c Revenues > Expenses

4. d Revenues < Expenses

A balance sheet, in a proprietorship, shows

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

2. b expenses, drawings, and owner's equity

3. c revenues, expenses, and drawings

4. d assets, liabilities, and owner's equity

Which of the following transactions would NOT affect Cash?

1. a payment to a supplier on account

2. b purchase of supplies on account

3. c payment of salaries for the week

4. d prepaying an insurance premium

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

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

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