Test bank for financial and managerial accounting 3rd edition

had the following transactions in June: Earned $4,000 "on account;" collected $3,000 from a customer which was owed from a previous month; incurred $500 of repair expense and paid cash t

Test Bank for Financial and Managerial Accounting 3rd

Edition

Ace Machine Co had the following transactions in June: Earned $4,000 "on account;" collected $3,000 from a customer which was owed from a previous month; incurred $500 of repair expense and paid cash to the repairman; paid

$1,200 to a supplier that it owed from the previous month; paid out $800 in cash dividends to shareholders What is the combined effect on Retained earnings of the June transactions?

1 A) Down $2,700

2 B) Down $5,700

3 C) Up $2,700

4 D) Down $4,500

Ace Machine Co had the following transactions in June: Earned $4,000 "on account;" collected $3,000 from a customer which was owed from a previous month; incurred $500 of repair expense and paid cash to the repairman; paid

$1,200 to a supplier that it owed from the previous month; paid out $800 in cash dividends to shareholders What is the combined effect on Cash of the June transactions?

$1,200 to a supplier that it owed from the previous month; paid out $800 in cash dividends to shareholders How much was the Net income in June?

promised to pay one month later; paid out $1,000 in cash dividends to

shareholders What is the combined effect on Retained earnings of the June transactions?

1 A) Up $2,800

2 B) Down $300

3 C) Down $6,300

4 D) Up $5,300

ABC Delivery Co had the following transactions in June: Earned $4,000 cash for services rendered; collected $2,500 from a customer "on account;" paid out $200 cash for plumbing services; received $3,500 of supplies and

promised to pay one month later; paid out $1,000 in cash dividends to

shareholders What is the combined effect on Cash of the June

promised to pay one month later; paid out $1,000 in cash dividends to

shareholders How much was Net income in June?

1 A) $5,300

2 B) $2,800

3 C) $6,300

4 D) $3,800

Beginning retained earnings was $25,000 Ending retained earnings is

$37,000 Dividends paid were $23,000 What was net income or loss for the year?

1 A) Net income of $16,000

2 B) Net loss of $35,000

3 C) Net loss of $14,000

4 D) Net income of $35,000

Net income is $34,000 Beginning retained earnings is $29,000 Ending

retained earnings is $55,000 What was the amount of dividends paid?

The statement of retained earnings shows the changes in retained earnings Which one of these statements is TRUE?

1 A) Increases in Retained earnings result from owner investments

2 B) Decreases in Retained earnings result from net losses

3 C) Increases in Retained earnings result from net losses

4 D) Decreases in Retained earnings result from revenues earned

The income statement presents a summary of an entity's revenues and

expenses for a period of time Which of the following statements is

TRUE?

1 A) There is net income when total revenues are greater than total expenses

2 B) There is a net loss when total expenses are greater than total revenue

3 C) There is a net loss when dividends are paid

4 D) Both A and B are true

The balance sheet, or statement of financial position, is like a snapshot of the entity Which of the following items are included on the balance sheet?

2 B) Date or time period covered

3 C) Name of the preparer of the statement

4 D) Name of the business

Which of the following financial statements reports expenses in decreasing order of their amount, with the largest expense first?

1 A) Statement of cash flows

1 A) Statement of retained earnings

2 B) Statement of cash flow

3 C) Balance sheet

4 D) Statement of dividends paid

Which of the following financial statements reports that total assets equals total liabilities plus total stockholders' equity?

1 A) Statement of retained earnings

2 B) Statement of cash flows

3 C) Income statement

4 D) Balance sheet

Which of the following financial statements reports cash receipts and cash payments during a period of time?

1 A) Statement of cash flows

2 B) Balance sheet

3 C) Income statement

4 D) Statement of retained earnings

Which of the following financial statements reports an increase or decrease in net cash during the time period covered?

1 A) Income statement

2 B) Statement of retained earnings

3 C) Statement of cash flows

4 D) Balance sheet

The financial statements should be prepared in what order?

1 A) Income statement, statement of retained earnings, balance sheet,

statement of cash flows

2 B) Statement of retained earnings, balance sheet, income statement,

statement of cash flows

3 C) Balance sheet, statement of retained earnings, income statement,

statement of cash flows

4 D) Balance sheet, income statement, statement of retained earnings,

statement of cash flows

Which of the following amounts appear on both the income statement and the statement of retained earnings?

1 A) Ending retained earnings

3 C) Ending retained earnings

4 D) None of the above amounts appear on both

Which of the following financial statements shows the changes in retained earnings during a period of time?

1 A) Income statement

2 B) Statement of retained earnings

3 C) Statement of cash flows

4 D) Statement of cash flows

On the financial statements, which line item connects the balance sheet to the statement of cash flows?

1 A) Retained earnings (ending balance)

2 B) Net income

3 C) Total assets

4 D) Cash (ending balance)

You can evaluate business performance in terms of profitability by analyzing which of the following financial statements?

1 A) Income statement

2 B) Balance sheet

3 C) Statement of cash flows

4 D) None of the above

You can evaluate the economic resources, debt, and overall financial position

of a company in which of the following financial statements?

1 A) Income statement

2 B) Balance sheet

3 C) Statement of cash flows

4 D) Statement of retained earnings

The explanation of why the net income differs from change in cash balance for the period is explained in which of the following statements?

1 A) Income statement

2 B) Balance sheet

3 C) Statement of retained earnings

4 D) Statement of cash flows

If an analyst wanted to know how likely it was that a company would be able

to pay off all its debts, which of the following statement would be MOST useful?

1 A) Income statement

2 B) Balance sheet

3 C) Statement of retained earnings

4 D) Statement of cash flows

If an analyst wanted to know how likely it was that a company would be able

to earn profits, which of the following statement would be MOST useful?

1 A) Income statement

2 B) Balance sheet

3 C) Statement of retained earnings

4 D) Statement of cash flows

Accounting is the information system that measures business activity,

processes the data into reports, and communicates the results to decision makers

Outside investors would ordinarily use financial accounting information to decide whether or not to invest in a business

Different users of the financial statements (investors, creditors, tax

authorities, etc.) all focus on the same parts of the financial statements for the information they need

1 True

2 False

The AICPA's Code of Professional Conduct for Accountants provides guidance

to CPAs in the performance of their work

1 True

2 False

GAAP is the set of accounting rules for international accounting

A U.S publicly traded company does not come under SEC regulations as long

as it follows the rules of GAAP

The PCAOB is a watchdog agency that monitors the work of small, privately owned businesses

1 True

2 False

Independent accountants that audit public companies come under the

regulatory supervision of the PCAOB

Similar to partnerships, in a limited-liability company (LLC), the members are personally liable for the debts and obligations of the business

Corporations are subject to stricter regulation than other forms of

businesses, so it is more difficult for corporations to raise large amounts of investment capital

1 True

2 False

The most an investor in a corporation can lose-in the event the business

fails-is limited to the amount the party has invested

Many liabilities have the word "receivable" in their titles

The relative proportion of economic resources and obligations would be

shown by the balance sheet

1 A) Managerial accounting focuses on information for internal decision making.

2 B) Managerial accounting focuses on outside investors and lenders

3 C) Managerial accounting provides information for the public

4 D) Managerial accounting provides information for taxing authorities

By definition, which of the following represent the owners of a

Which of the following statements BEST defines financial statements?

1 A) Financial statements are the information system that records and

measures business transactions

2 B) Financial statements are the verbal statements made to business news organizations by chief financial officers

3 C) Financial statements are documents that report on a business in monetary terms, providing information to help people make informed business

decisions

4 D) Financial statements are plans and forecasts for future time periods

Items such as buildings and land are:

1 A) liabilities

2 B) equity

3 C) assets

4 D) revenues

Many organizations have contributed to the establishment of generally

accepted accounting principles Which of the following organizations has the primary responsibility for formulating accounting standards?

1 A) FASB

2 B) CMA

3 C) AICPA

4 D) SEC

Which of the following is a licensed accountant who serves the general public rather than an accountant who serves one particular company?

1 A) Globally accepted and accurate policies

2 B) Global accommodation accounting principles

3 C) Generally accredited accounting policies

4 D) Generally accepted accounting principles

Which of the following are MOST likely to be users of managerial accounting information?

4 D) All of the above

Accounting standards are formulated by the:

1 A) SEC

2 B) AICPA

3 C) FASB

4 D) IRS

The Sarbanes-Oxley Act ("SOX") made it a criminal offense to:

1 A) steal shareholders` money

2 B) default on loans from creditors

3 C) declare bankruptcy.

4 D) falsify financial information

Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?

1 A) SEC

2 B) Board of Directors

3 C) Shareholders

4 D) Independent Accountants (CPAs)

The largest businesses are usually organized as:

1 A) corporations

2 B) partnerships

3 C) proprietorships

4 D) LLCs

Businesses can be organized in a variety of forms The types of businesses commonly found in the U.S include all of the following EXCEPT:

1 A) If a corporation cannot pay its debts, lenders can take the owners`

personal assets to satisfy the obligations

2 B) A corporation is a distinct entity in the eyes of the law

3 C) Corporation ownership is divided into shares of stock

4 D) A corporation is owned by shareholders or stockholders

Corporate ownership is a very popular type of ownership in the United States because:

1 A) corporate shareholders have limited liability for the debts of the

corporation

2 B) most corporations are small or medium-sized companies

3 C) the life of a corporation is limited by the death of an owner

4 D) a corporation is usually managed by the owners

Which of the following is NOT a characteristic of a traditional

partnership?

1 A) A partnership is owned by shareholders or stockholders

2 B) If a partnership cannot pay its debts, lenders can take the owners` personal assets to satisfy the obligations

3 C) A partnership joins two or more individuals as co-owners

4 D) Each partner has the authority to commit the entire partnership to a binding contract

Which of the following is TRUE for a proprietorship?

1 A) A proprietorship joins two or more individuals as co-owners

2 B) The proprietor is not personally liable for the debts of the proprietorship

3 C) A proprietorship has a single owner

4 D) A proprietorship has an indefinite life

Which of the following is a characteristic of a limited liability partnership (LLP)?

1 A) A limited liability partnership issues shares of stock to shareholders

2 B) Each partner is liable only for the actions under his or her control

3 C) A limited liability partnership is owned by a single investor

4 D) The limited liability partners are subject to `double taxation.`

Caleb Brown has been the sole owner of a bicycle sales and repair shop for many years Which of the following business types would best protect Caleb's personal assets from product liability exposure?

liability for his partner's aggressive auditing tactics?

1 A) Limited liability partnership

2 B) Traditional partnership

3 C) Not-for-profit

4 D) Proprietorship

Phillip and Reed have developed a new technology for home computer

systems However, they need to raise a large amount of capital to build the production and support facilities to market their product successfully Which

of the following business types would be best suited to help the company raise the necessary capital to begin production?

David has decided to open an auto-detailing business He will pick up an automobile from the client, take it to his parents' garage, detail it, and return

it to the client If he does all of the work himself and takes no legal steps to form a special organization, which type of business organization, in effect, has he chosen?

1 A) Limited liability company

2 B) Partnership

3 C) Corporation

4 D) Proprietorship

The first step in incorporation is to:

1 A) have the board of directors designate a president

2 B) agree to a set of bylaws

3 C) issue the first shares of stock

4 D) obtain a charter from the state

In an LLC, who is responsible for the company's debts?

1 A) The company itself

1 A) assets of the shareholders.

2 B) assets of the company only

3 C) assets of the board of directors

4 D) employees of the company

The owner(s) of a business will most likely face "double taxation" if their business is organized as a(n):

Which of the following concepts (or principles) addresses the ability of

partners to commit other partners and the business to a contract?

An American business records transactions using the U.S dollar and

disregards fluctuation in the buying power of the dollar over time This represents which of the following concepts or principles?

1 A) The entity concept

2 B) The going-concern concept

3 C) The faithful representation

4 D) The stable monetary unit principle

Which of the following concepts (principles) would require that an item be recorded at the amount actually paid rather than at estimated market value?

1 A) Going-concern concept

2 B) Entity concept

3 C) Cost principle

4 D) Stable monetary unit concept

Which of the following concepts (principles) require an assumption that the entity will remain in operation for the foreseeable future?

1 A) Entity concept

2 B) Faithful representation principle

3 C) Going-concern concept

4 D) Cost principle