172 test bank for financial accounting IFRS edition 2nd edition

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172 Test Bank for Financial Accounting IFRS Edition 2nd Edition

by Weygandt

Multiple Choice Questions

Equity is best depicted by the following:

1 a Assets = Liabilities.

2 b Liabilities + Assets.

3 c Residual equity + Assets.

4 d Assets – Liabilities.

The basic accounting equation may be expressed as

1 a Assets - Equity = Liabilities.

2 b Assets – Liabilities = Equity.

3 c Assets = Liabilities + Equity.

4 d All of these answer choices are correct.

Which one of the following is not an external user of accounting information?

1 a Regulatory agencies.

2 b Customers.

3 c Investors.

4 d All of these answer choices are correct.

Which of the following would not be considered internal users of accounting data for a company?

1 a The president of a company.

2 b The controller of a company.

3 c Creditors of a company.

4 d Salesmen of a company.

Liabilities

1 a are future economic benefits.

2 b are existing debts and obligations.

3 c possess service potential.

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

External users of accounting information include the

1 a lnternational Accounting Standards Board.

2 b shareholders of Ferragamo.

3 c Marketing department at Olivetti.

4 d CEO of Air Italy.

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.

The accounting process involves all of the following except

1 a identifying economic events that are relevant to the business.

2 b communicating financial information to users by preparing financial reports.

3 c recording non-quantifiable economic events.

4 d analyzing and interpreting financial reports.

The body that has the power to prescribe the accounting

practices and standards used by most US companies is the

1 a FASB.

2 b IASB.

3 c GAAP.

4 d IFRS.

Internal users of accounting information include all of following except the

1 a CEO of Sony.

2 b Human Resources department at Hyundai.

3 c Marketing department at Braun.

4 d Shareholders of Airbus.

The fair value principle

1 a is one of the two costing principles followed by the IASB.

2 b is more useful than the historical cost principle for valuing some assets.

3 c dictates that an asset should be valued at the price at which it could be sold.

4 d All of these answer choices are correct.

Asian Company purchased land for W92,000,000 in 2000 At December 31, 2014, an appraisal determined the fair value of the land is W106,000,000 The company has an investment in the ordinary shares of another company for which it paid

W49,000,000 in 2012.The shares are actively traded on the SouthKorea Stock Exchange The fair value of the investment at

December 31, 2014 is W63,000,000 The land and investment will

be reported on the December 31, 2014 statement of financial position at

Which of the following would not be considered an external user

of accounting data for the GHI Company?

1 a Taxing authority representative.

2 b Management.

3 c Creditors.

4 d Customers.

Recording of economic events involves

1 a keeping a systematic, chronological diary of events.

2 b analyzing reported information.

3 c explaining the meaning of reported data.

4 d preparing accounting reports.

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

A business organized as a corporation

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

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.

The economic entity assumption requires that the activities

1 a of different entities can be combined if all the entities are corporations.

2 b must be reported to the Securities and Exchange Commission.

3 c of a sole proprietorship cannot be distinguished from the personal

economic events of its owners.

4 d of an entity be kept separate from the activities of its owner.

Bookkeeping primarily involves which of the following parts of the accounting process?

3 c historical cost principle.

4 d monetary unit assumption.

Which of the following is an external user of accounting

The first step in solving an ethical dilemma is to

1 a identify and analyze the principal elements in the situation.

2 b identify the alternatives.

3 c recognize an ethical situation and the ethical issues involved.

4 d weigh the impact of each alternative on various stakeholders.

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.

The origins of accounting are generally attributed to the work of

1 a Christopher Columbus.

2 b Abner Doubleday.

3 c Luca Pacioli.

4 d Leonardo da Vinci.

Internal users of accounting information include

1 a the shareholders of Royal Dutch Shell.

2 b the State Administration of Taxation of China.

3 c the Chief Financial officer of Credit Suisse.

4 d the International Accounting Standards Board.

The final step in solving an ethical dilemma is to

1 a identify and analyze the principal elements in the situation.

2 b recognize an ethical situation.

3 c identify the alternatives and weigh the impact of each alternative on stakeholders.

4 d recognize the ethical issues involved.

Most assets should be valued at cost because fair values

1 a are not useful for decision-making.

2 b may not be representationally faithful.

3 c are not relevant.

4 d may be higher or lower than historical cost.

Equity is often referred to as

1 a residual equity.

2 b leftovers.

3 c spoils.

4 d second equity.

Equity can be described as

1 a creditorship claim on total assets.

2 b ownership claim on total assets.

3 c benefactor's claim on total assets.

4 d debtor claim on total assets.

The Duce Company has five plants nationwide that cost $200 million The current fair value of the plants is $500 million The plants will be recorded and reported as assets at

1 a using the same accounting principles from one period to the next.

2 b use of the same accounting principles by all companies.

3 c the elimination of all accounting standard-setting bodies except the International Accounting Standards Board.

4 d the process of reducing the differences between IFRS and GAAP.

The historical cost principle requires that companies record assets at their

1 a appraisal value.

2 b cost.

3 c market price.

4 d list price.

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 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.

External users of accounting information include all of following except

1 a the shareholders of Air Italy.

2 b the management of Pirelli.

3 c a potential customers of Olivetti.

4 d All of these answer choices are correct.

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

1 a The appointment of a new accounting firm to perform an audit.

2 b The purchase of a new computer.

3 c The sale of store equipment.

4 d Payment of income taxes.

The accounting process includes each of the following except

1 a communication.

2 b convergence.

3 c identification.

1 a stand alone concept.

2 b monetary unit assumption.

3 c corporate form of ownership.

4 d economic entity assumption.

Bumi Corporation purchased an investment in the ordinary shares

of another corporation for Rp250,000,000 in 2012 The shares areactively traded on the Indonesian Stock Exchange The fair value

of the investment at December 31, 2014 is Rp268,000,000 If the company follows the fair value principle, the investment will be reported in the 2014 financial statement at

1 a Rp250,000,000 on the statement of financial position.

2 b Rp268,000,000 on the statement of financial position.

3 c Rp250,000,000 on the retained earnings statement.

4 d Rp268,000,000 on the retained earnings statement.

A business whose owners enjoy limited liability is a

1 a right or wrong.

2 b honest or dishonest.

3 c fair or unfair.

4 d All of these answer choices are correct.

Communication of economic events is the part of the accounting process that involves

1 a identifying economic events.

2 b quantifying transactions into dollars and cents.

3 c preparing accounting reports.

4 d recording and classifying information.

The proprietorship form of business organization

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

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

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 ofaccounting data for GHI Company?

1 a President of the company.

2 b Production manager.

3 c Merchandise inventory clerk.

4 d President of the employees' labor union.

IFRS are determined by the

1 a Internal Accounting Standards Body.

2 b International Accounting Studies Board.

3 c International Accounting Standards Board.

4 d International Auditors' Standards Body.

Harrod's Inc purchased land for ₤55,000 in 2004 At December

31, 2014, an appraisal determined the fair value of the land is

₤65,000 If Harrod's follows the historical cost principle, in the

2014 financial statements, the land will be reported at

1 a ₤55,000 on the statement of financial position.

2 b ₤65,000 on the statement of financial position.

3 c ₤55,000 on the income statement.

4 d ₤65,000 on the income statement.

Hyundai Inc purchased land for W118,000,000 in 2005 At

December 31, 2014, an appraisal determined the fair value of the land is W136,000,0000 If Hyundai follows the cost principle, the land will be reported on the statement of financial position at

1 a W100,000,000.

2 b W118,000,000.

3 c W136,000,000.

4 d W154,000,000.

The accounting process is correctly sequenced as

1 a identification, communication, recording.

2 b recording, communication, identification.

3 c identification, recording, communication.

4 d communication, recording, identification.

Financial accounting provides economic and financial information for each of the following except

1 a creditors.

2 b investors.

3 c managers.

4 d other external users.

John and Sam 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

1 a joint venture.

1 a Cash and Accounts Payable by R$295,000.

2 b Accounts Receivable and Service Revenue by R$295,000

3 c Cash and decrease Accounts Receivable by R$295,000

4 d Service Revenue and decrease Accounts Receivable by R$295,000.

As of June 30, 2014, Dallas Company has assets of $140,000 and equity of $10,000 What are the liabilities for Dallas Company

Collection of a $500 accounts receivable

1 a increases an asset $500; decreases an asset $500.

2 b increases an asset $500; decreases a liability $500.

3 c decreases a liability $500; increases equity $500.

4 d decreases an asset $500; decreases a liability $500.

McDonagal Inc sold ordinary shares for £2,200,000 This

transaction will increase

1 a Cash and increase Retained Earnings by £2,200,000.

2 b Cash and increase Share Capital by £2,200,000.

3 c Service Revenue and increase Share Capital by £2,200,000.

4 d Service Revenue and increase Cash by £2,200,000.

A statement of financial position shows

1 a revenues, liabilities, and equity.

2 b expenses, dividends and equity.

3 c revenues, expenses, and dividends.

4 d assets, liabilities, and equity.

A company increases its share capital by

1 a selling ordinary shares to its investors.

2 b performing services for cash.

3 c selling goods on account.

4 d paying dividends to its shareholders.

A payment on account decreases

1 a assets and equity.

2 b liabilities and equity.

3 c assets and liabilities.

4 d assets, liabilities and equity.

Sources of increases to equity are

1 a issuance of shares.

2 b purchases of merchandise.

3 c dividends.

4 d expenses.

Sao Paulo Company performed services on account for

R$160,000 This transaction will

1 a increase assets and liabilities by R$160,000.

2 b increase assets and equity by R$160,000.

3 c increase liabilities and equity by R$160,000.

4 d have no effect on the accounting equation.

As of December 31, 2014, Thames Company reported assets of

₤6,480,000, liabilities of ₤1,920,000 and retained earnings of

₤3,315,000 Share capital reported on the December 31, 2014 statement of financial position is

1 a ₤1,245,000.

2 b ₤1,395,000.

3 c ₤5,235,000.

4 d ₤9,795,000.

As of December 31, 2014, Oxford-welsh Inc had assets of

₤6,520,000, liabilities of ₤1,980,000, and share capital of

₤2,820,000 Retained earnings as of that date are

1 a ₤1,720,000.

2 b ₤3,700,000.

3 c ₤4,540,000.

4 d ₤6,520,000.

Which of the following events is not a business transaction?

1 a Issuance of shares in exchange for cash

2 b Hired employees

3 c Incurred utility expenses for the month

4 d Earned revenue for services provided

On January 11, 2014, Britannica Corporation sold ordinary shares

to investors for ₤6,550,000 This transaction will increase assets and

If total liabilities increased by ¥35,000 and equity increased by

¥10,000 during a period of time, then total assets must change bywhat amount and direction during that same period?

1 a ¥45,000 decrease

2 b ¥45,000 increase

3 c ¥60,000 increase

4 d ¥70,000 increase

If services are rendered for credit, then

1 a assets will decrease.

2 b liabilities will increase.

3 c equity will increase.

4 d liabilities will decrease.

As of December 31, 2014, Deitrich Inc had assets of

€13,050,000, liabilities of €4,650,000, share capital of ₤3,300,000 and retained earnings of €5,100,000 Total equity as of that date

1 a share capital and liablities.

2 b assets and liablities.

3 c share capital and retained earnings.

4 d share capital and assets.

If expenses are paid in cash, then

1 a assets will increase.

2 b liabilities will decrease.

3 c equity will increase.

4 d assets will decrease.

The basic accounting equation cannot be restated as

1 a Assets – Liabilities = Equity.

2 b Assets – Equity = Liabilities.

3 c Equity + Liabilities = Assets.

4 d Assets + Liabilities = Equity.

As of December 31, 2014, Sievers Company has assets of

₤90,000 and equity of ₤40,000 What are the liabilities for Sievers Company as of December 31, 2014?

1 a ₤50,000.

2 b ₤20,000.

3 c ₤30,000.

4 d ₤40,000.

If an individual asset is increased, then

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

2 b there must be an equal decrease in equity.

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

4 d None of these answer choices are correct.

Revenues would not result from

If total liabilities decreased by ¥30,000 and equity increased by

¥5,000 during a period of time, then total assets must change by what amount and direction during that same period?

1 a ¥25,000 decrease

2 b ¥25,000 increase

3 c ¥30,000 increase

4 d ¥35,000 increase

The net income reported by Carla's Computer Repair Shop for theyear was

1 a decrease Cash and increase Advertising Expense by £900.

2 b increase Advertising Expense and increase Accounts Payable by £900.

3 c decrease Accounts Payable and decrease Cash by £900.

4 d decrease Cash and decrease Advertising Expense by £900.

If the retained earnings account increases from the beginning of the year to the end of the year, then

1 a net income is less than dividends.

2 b net loss is less than dividends.

3 c the company must have sold shares.

4 d net income is greater than dividends.

Retained earnings at the end of the period is equal to

1 a retained earnings at the beginning of the period plus net income minus liabilities.

2 b retained earnings at the beginning of the period plus net income minus dividends.

3 c net income.

4 d assets plus liabilities.