Test 1 Multiple Choice
Connor Corporation hired a new accountant. Over the next four years, the accountant used four different accounting methods to depreciation for Connor's equipment. Which of the following qualities of useful information has Connor most likely violated? A.Consistency B.Relevance C.Faithful representation D.Comparability
A
If total liabilities decreased by $90000 and stockholders' equity increased by $30000 during a period of time, then total assets must change by what amount and direction during that same period? A.$60000 decrease B.$60000 increase C.$90000 decrease D.$120000 increase
A
The effect on the basic accounting equation of performing services for cash are to A.increase assets and increase stockholders' equity. B.increase assets and increase liabilities. C.increase liabilities and increase stockholders' equity. D.increase assets and decrease stockholders' equity.
A
The going concern assumption assumes that the business A.will remain in operation for the foreseeable future. B.will be liquidated in the near future. C.is in a growth industry. D.will be purchased by another business.
A
The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n) A.account payable. B.revenue. C.account receivable. D.expense.
A
Which is an advantage of corporations relative to partnerships and sole proprietorships? A.Reduced legal liability for investors B.Increased difficulty of raising funds C.Most common form of organization D.Harder to transfer ownership
A
Which of the following are constraints that allow a company to modify generally accepted accounting principles without jeopardizing the usefulness of the financial statements? A.Cost constraint B.Consistency and comparability C.Relevance and faithful representation D.Timeliness and neutrality
A
Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? A.Reduced legal liability for investors B.Most common form of organization C.Harder to transfer ownership D.Lower taxes
A
A business organized as a corporation A.is not a separate legal entity in most states. B.is owned by its stockholders. C.requires that stockholders be personally liable for the debts of the business. D.has tax advantages over a proprietorship or partnership.
B
An advantage of the corporate form of business is that A.it is simple to establish. B.its ownership is easily transferable via the sale of shares of stock. C.its owner's personal resources are at stake. D.it has limited life.
B
Borrowing money is an example of a(n) A.investing activity. B.financing activity. C.operating activity. D.delivering activity.
B
In 2017, Bombay Corporation had cash receipts of $21,000 and cash disbursements of $12,000. The company's ending cash balance at December 31, 2017 was $33,000. What was the beginning cash balance? A.$24,000 B.$45,000 C.$42,000 D.$30,000
B
In which forms of business organization are the owners personally liable for all the debts of the business? A.Sole proprietorships and corporations B.Sole proprietorships and partnerships C.Partnership and corporation D.All of the answer choices are correct
B
Payment of a dividend A.decreases cash; increases stockholders' equity. B.decreases cash; decreases retained earnings. C.increases retained earnings; increases expenses. D.increases expenses; decreases cash.
B
Retained earnings is decreased by A.assets. B.expenses. C.revenues. D.owner's investments.
B
The retained earnings statement shows all of the following except A.beginning retained earnings on the first line of the statement. B.the time period following the one shown for the income statement. C.the amounts of changes in retained earnings during the period. D.the causes of changes in retained earnings during the period.
B
Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? A.Economic entity assumption B.Going concern assumption C.Periodicity assumption D.Monetary unit assumption
B
Which forms of business organization are considered to be separate accounting entities? A.Only corporations B.Sole proprietorships, corporations, and partnerships C.Sole proprietorships and partnerships only D.Partnerships and corporations only
B
Which is not one of the three forms of business organization? A. Sole proprietorship B.Creditorship C.Corporation D.Partnership
B
Which of the following activities involves collecting the necessary funds to support the business? A.Investing B.Financing C.Operating D.Delivering
B
Which of the following financial statements is concerned with the company at a point in time? A.Statement of cash flows B.Balance sheet C.Income statement D.Retained Earnings statement
B
Which of the following is not a principal type of business activity? A.Financing B.Delivering C.Operating D.Investing
B
Which of the following is not a step for solving an ethical dilemma? A.Identifying and analyzing the principal elements in the situation. B.Certifying the ethical accuracy of the financial information. C.Recognizing the ethical situation and issues involved. D.Identifying the alternatives and weighing the impact of each alternative on various stakeholders.
B
Which of the following is not an accounting assumption? A.Economic entity B.Periodicity C.Integrity D.Going concern
B
Which of the following is the most appropriate definition of accounting information? A.A means of collecting information. B.The information system that identifies, records, and communicates the economic events of an organization to interested users. C.The interconnected network of subsystems necessary to operate a business. D.Electronic collection and organization of vast amounts of financial information.
B
A business organized as a separate legal entity is a A.government unit. B.partnership. C.corporation. D.proprietor.
C
During 2017, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity A.decreased $140,000. B.decreased $40,000. C.increased $40,000. D.increased $140,000.
C
Easy transfer of ownership is a characteristic of which form of business organization? A.Sole proprietorship B.Partnership C.Corporation D.All of the answer choices are correct
C
Ending retained earnings for a period is equal to beginning A.Retained earnings - Net income - Dividends. B.Retained earnings - Net income + Dividends. C.Retained earnings + Net income - Dividends. D.Retained earnings + Net income + Dividends.
C
For 2017, Stoneland Corporation reported net income, $24,000; net sales, $400,000; and average shares outstanding, 6,000. There were no preferred stock dividends. How much was the 2017 earnings per share? A.$16.67 B.$0.06 C.$4.00 D.$66.67
C
If cash is received in advance from a customer A.stockholders' equity will decrease. B.assets will decrease. C.liabilities will increase. D.retained earnings will increase.
C
If total liabilities increased by $90000 and stockholders' equity increased by $30000 during a period of time, then total assets must change by what amount and direction during that same period? A.$150000 increase B.$120000 decrease C.$120000 increase D.$180000 increase
C
It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of the A.periodicity assumption. B.going concern assumption. C.economic entity assumption. D.monetary unit assumption.
C
Receipt of an unearned revenue A.decreases a liability; increases stockholders' equity. B.decreases a revenue; increase stockholders' equity. C.increases an asset; increases a liability. D.increases an asset; increases a revenue.
C
The TNT Company has five plants nationwide that cost $300 million. The current fair value of the plants is $500 million. The plants will be reported as assets at A.$800 million. B.$200 million. C.$300 million. D.$500 million.
C
The economic entity assumption states that economic events A.of a sole proprietorship cannot be distinguished from the personal economic events of its owners. B.must be reported to the Securities and Exchange Commission. C.of every entity can be separately identified and accounted for. D.of different entities can be combined if all the entities are corporations.
C
The historical cost principle requires that when assets are acquired, they be recorded at A.selling price. B.market value C.the amount paid for them. D.list price.
C
The principle that indicates that assets should be reported at the price received to sell an asset is the A.consistency principle. B.historical cost principle. C.fair value principle. D.full disclosure principle.
C
The sole proprietorship form of business organization A.is classified as a separate legal entity. B.must have at least two owners in most states. C.generally receives favorable tax treatment relative to a corporation. D.combines the records of the business with the personal records of the owner.
C
Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)? A.The Act has resulted in increased penalties for financial fraud by top management. B.The Act calls for increased oversight responsibilities for boards of directors. C.The Act calls for decreased independence of outside auditors reviewing corporate financial statements. D.The Act is meant to decrease the likelihood of unethical corporate behavior.
C
Ashley's Accessory Shop started the year with total assets of $210000 and total liabilities of $120000. During the year the business recorded $330000 in revenues, $165000 in expenses, and dividends of $60000. The net income reported by Ashley's Accessory Shop for the year was A.$150000. B.$120000. C.$195000. D.$165000.
D
Debt securities sold to investors that must be repaid at a particular date some years in the future are called A.accounts payable. B.notes receivable. C.taxes payable. D.bonds payable.
D
Genesis Company buys equipment for $900 machine on credit. This transaction will immediately affect the A.income statement, retained earnings statement, and balance sheet. B.income statement only. C.income statement and retained earnings statement only. D.balance sheet only.
D
If an expense is paid with cash A.liabilities will increase. B.expenses will decrease. C.retained earnings will increase. D.assets will decrease.
D
Issuing shares of stock in exchange for cash is an example of a(n) A.investing activity. B.delivering activity. C.operating activity. D.financing activity.
D
Most business enterprises in the United States are A.partnerships. B.government units. C.corporations. D.proprietorships and partnerships.
D
The periodicity assumption states A.every economic entity can be separately identified and accounted for. B.only those things that can be expressed in money are included in the accounting records. C.the business will remain in operation for the foreseeable future. D.the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared.
D
The proprietorship form of business organization A.combines the records of the business with the personal records of the owner. B.is classified as a separate legal entity. C.must have at least two owners in most states. D.generally receives favorable tax treatment relative to a corporation.
D
The right to receive money in the future is called a(n) A.revenue. B.liability. C.account payable. D.account receivable.
D
To show how successfully your business performed during a period of time, you would report its revenues and expenses in the A.balance sheet. B.statement of cash flows. C.retained earnings statement. D.income statement.
D
To which of the following questions will internal users want answers? A.What selling price for our product will maximize the company's net income? B.Which product line is most profitable? C.Is cash sufficient to pay dividends to stockholders? D.All of the answer choices are correct.
D
Which of the following events is not recorded in the accounting records? A.The owner withdraws cash for personal use. B.Equipment is purchased on account. C.A cash investment is made into the business. D.An employee is terminated.
D
Which of the following is required as a result of SOX? A.Companies that go bankrupt must repay shareholders for loss investments. B.Public companies must present audited financial statements. C.All shareholders now have an oversight role of the company's financial activities. D.Top management must certify the financial statements for their company.
D
