Test Bank for Financial and Managerial Accounting 11th Editio 1 PDF

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Test Bank for Financial and Managerial Accounting 11th Edition

The initials GAAP stand ffor or

1. General Accounting Procedures 2. Generally Accepted Plans 3. Generally Accepted Accounting Principles 4. Generally Accepted Accounting Practices Within the United States, the domina dominant nt body in the primary developm development ent of accounting principle principless is the

1. American Institute of Certified Public Accountants (AICPA) 2. American Accounting Association (AAA)

3. Financial Accounting Standards Board (FASB) 4. Institute of Management Accountants (IMA) The business entity cconcept oncept means that

1. the owner is part of the business entity 2. an entity is organized according to state or federal statutes 3. an entity is organized according to the rules set by the FASB 4. the entity is an individual economic unit for which data are recorded, analyzed, and reported Fo Forr accounting purposes, the busi busin ness entity sho should uld be considered separ separate ate from its owners if the entity is

1. a corporation 2. a proprietorship 3. a partnership 4. all of these The objectivity concept req requ uires that

1. business transactions must be consistent with the objectives of the entity 2. the Financial Accounting Standards Board must be fair and unbiased in its deliberations over new accounting standards 3. accounting principles must meet the objectives of the Security and Exchange Commission 4. amounts recorded in the financial statements must be based on independently verifiable evidence Denzel Jones is the major stock stockholder holder of Crystal Cleaning Compan Companyy, a small corporation corporation.. R Recently ecently ecently,, Denzel received received $18,000 of dividends from from Crystal Cleaning. After receiving receiving the dividends, he contributed $14 $14,000, ,000, in his name, to Habitat ffor or Humanity Humanity.. The contribution of the $ $14,000 14,000 should be recorded on the ac accounting counting records of w which hich of the follo following wing entities?

1. Crystal Cleaning and Habitat for Humanity 2. Denzel Jones` personal records and Habitat for Humanity 3. Denzel Jones’ personal records and Crystal Cleaning 4. Denzel Jones’ personal records, Crystal Cleaning, and Habitat for Humanity

Equipment with an estimated marke markett va value lue of $55,000 is off offe e red ffor or sale at $75,000. The equipment is acquired ffor or $20,000 in cash and a note pa paya ya yable ble of $40,000 due in 30 da days. ys. The amount used in the buyer's accounting records to record tth his acquisition is

1. $55,000 2. $60,000 3. $20,000 4. $75,000 Which one of the ffollowing ollowing is the authoritative body in the United States havi having ng th the e primary responsibility ffor or developing accounting principles?

1. FASB 2. IRS 3. SEC 4. AICPA Which of the following following concepts relates to separating separating the reporting of business and personal economic transac transactions? tions?

1. cost concept 2. unit of measure concept 3. business entity concept 4. objectivity concept Donner Company is sel selling ling a piece of land adjacent to their busi busin ness. An appr appraisal aisal reported the market vvalue alue of the land to be $120,000. The Foc Focus us Company initia initially lly off offered ered to buy the land for $107 $107,,000. The companies settl settled ed on a purchase pric price e of $115,000. On the same day day,, another piece of land on the same block sold ffor or $122,000. Under the cost concept, what is the amount that will be used to record thi thiss transact transaction ion in the accounting rec records? ords?

1. $107,000 2. $115,000 3. $120,000 4. $122,000

The unit of measure concep conceptt

1. is only used in the financial statements of manufacturing companies 2. is not important when applying the cost concept 3. requires that different units be used for assets and liabilities 4. requires that economic data be reported in yen in Japan or dollars in the United States Which of the following following is not true of accounting principles? principles?

1. Financial accountants follow generally accepted accounting principles (GAAP). 2. Following GAAP allows accounting information users to compare one company to another. 3. A new accounting principle can be adopted with stockholders approval. 4. The Financial Accounting Standards Board (FASB) has primary responsibility for developing accounting principles. Assets are

1. always greater than liabilities 2. either cash or accounts receivables 3. the same as expenses because they are acquired with cash 4. financed by owners and/or creditors Debts owed by a business are rreferred eferred tto o as

1. accounts receivables 2. assets 3. owner’s equity 4. liabilities The accounting equation may b be e expressed as

1. Assets = Equities - Liabilities 2. Assets + Liabilities = Owner’s Equity 3. Assets = Revenues - Liabilities 4. Assets - Liabilities = Owner’s Equity

Which of the ffollowing ollowing is not an asset?

1. investments 2. cash 3. inventory 4. owner’s equity The assets and liabilities of the company company are $175,000 and $40,000, $40,000, respectively. respectively. Stockholders’ Stockholders’ equity should equal

1. $215,000 2. $135,000 3. $175,000 4. $40,000 If total liabilities decreased by $5 $55,000 5,000 during a period of tim time e and owner’ owner’ss equit equityy increased by $60,000 during the same period period,, the amount and direct direction ion (increase or decrease) of the pe period's riod's change in total assets is

1. $115,000 increase 2. $5,000 increase 3. $5,000 decrease 4. $115,000 decrease Which of the ffollowing ollowing is not a business tr transaction? ansaction?

1. make a sales offer 2. sell goods for cash 3. receive cash for services to be rendered later 4. pay for supplies A business paid $7 $7,000 ,000 to a creditor in payment of an amou amoun nt owed. The eff effe e ct of the tr transaction ansaction on the accounting equatio equation n was to

1. increase one asset, decrease another asset 2. decrease an asset, decrease a liability 3. increase an asset, increase a liability 4. increase an asset, increase stockholders’ equity

Profit is the diff difference erence between

1. assets and liabilities 2. the incoming cash and outgoing cash 3. the assets purchased with cash invested by stockholders and the cash spent to operate the business 4. the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services Financial reports aare re used by

1. management 2. creditors 3. investors 4. all are correct Two common areas of accounting that rrespectively espectively pro provide vide information to internal and external users are

1. forensic accounting and financial accounting 2. managerial accounting and financial accounting 3. managerial accounting and environmental accounting 4. financial accounting and tax accounting systems Which type of accountant accountant typically practices practices as an individual or as a member of a public accounting accounting firm?

1. Certified Public Accountant 2. Certified Payroll Professional 3. Certified Internal Auditor 4. Certified Management Accountant All of the following aare re general general-purpose -purpose financial statements excep exceptt

1. balance sheet 2. income statement 3. retained earnings statement 4. cash budget

Which of the ffollowing ollowing is a manufacturi manufacturing ng business?

1. Amazon.com. 2. Wal-Mart. 3. Ford Motors. 4. Delta Airlines Which of the following following group of companies are are all examples of a merchandising merchandising business?

1. Delta Airlines, Marriott, Gap 2. Gap, Amazon, NIKE 3. GameStop, Sony, Dell 4. GameStop, Best Buy, Gap Which of the ffollowing ollowing would not normally oper operate ate as a service business?

1. pet groomer 2. restaurant 3. lawn care company 4. styling salon Which of the ffollowing ollowing best describes accounting?

1. records economic data but does not communicate the data to users according to any specific rules. 2. is an information system that provides reports to users regarding economic activities and condition of a business. 3. is of no use by individuals outside of the business. 4. is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements. Which of the ffollowing ollowing groups are conside considered red to be internal users of acc accounting ounting information?

1. Employees and customers 2. Customers and vendors 3. Employees and managers 4. Government and banks

The following are exam examples ples of external users of accounti accounting ng information exce except pt

1. government 2. customers 3. creditors 4. managers Due to various various fraudu fraudu practices and accounting coverups in in the early 2000’s, 2000’s, Congress audulent lent business practices enacted the Sarbanes-Oxley Act of 2002. T The he Act was respo responsible nsible for establishing a new oversig oversight ht board for p public ublic accountants called the

1. Generally Accepted Accounting Practices for Public Accountants Board 2. Public Company Accounting Oversight Board 3. Congressional Accounting Oversight Board 4. none of these Which of the ffollowing ollowing is the best description of acc accounting’ ounting’ ounting’ss role in business?

1. Accounting provides stockholders with information regarding the market value of the company’s stocks. 2. Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company. 3. Accounting provides creditors and banks with information regarding the credit risk rating of the company. 4. Accounting is not responsible for providing any form of information to users. That is the role of the Information Systems Department. Managerial accountants would be rresponsible esponsible for p providing roviding which of the following?

1. Tax reports to government agencies. 2. Profit reports to owners and management. 3. Expansion of a product line report to management. 4. Consumer reports to customers. Which of the ffollowing ollowing is not a certification fo forr accountants?

1. CIA 2. CMA 3. CISA

4. All are certifications. Which of the ffollowing ollowing is not a role of ac accounting counting in business?

1. to provide reports to users about the economic activities and conditions of a business 2. to personally guarantee loans of the business 3. to provide information to other users to determine the economic performance and condition of the business 4. to assess the various informational needs of users and design its accounting system to meet those needs Which of the ffollowing ollowing are guidelines ffor or behaving ethically? I.I I.Identify dentify the consequences of a decision and its eff effect ect on others. II II.Consider .Consider your obligatio obligation ns and responsib responsibilities ilities to those aff affected ected by the decision. III.Id III.Id entify your decision based on personal standards of honesty honesty and fairness.

1. I and II. 2. II and III. 3. I and III. 4. I, II, and III. The Sarbanes-Oxley Act of 2002 pr prohibits ohibits employment of auditors by ttheir heir clients for what period after their last audit of the client?

1. indefinitely 2. one year 3. two years 4. none of these Which of the ffollowing ollowing is not a charac characteristic teristic of a corpor corporation? ation?

1. Corporations are organized as a separate legal taxable entity. 2. Ownership is divided into shares of stock. 3. Corporations experience an ease in obtaining large amounts of resources by issuing stock. 4. A corporation’s resources are limited to its individual owners’ resources.

Countries outside the United States use fina finan ncial accounting standa standards rds issued by the

1. LLC 2. SEC 3. IASB 4. GAAP Which of the items below is not a bu bu siness entity? entity?

1. entrepreneurship 2. proprietorship 3. partnership 4. corporation An entity that is orga organized nized according to state or feder federal al statutes and in which ownership is divided into shares of stock is a

1. proprietorship 2. corporation 3. partnership 4. governmental unit Select the type of busi business ness that is most likely to obtain large amounts of resources by iss issu uing stock.

1. partnership 2. corporation 3. proprietorship 4. none of these Which of the ffollowing ollowing is true in regards to a LLimited imited Liability Co Company? mpany?

1. Makes up 10% of business organizations in the United States. 2. Combines the attributes of a partnership and a corporation. 3. Provides tax and liability advantages to the owners. 4. All are correct.

On April 25, Gregg R Repair epair Service extended an offer of $115 $115,000 ,000 for land that had be been en priced for sale at $140,000. On May 3 3,, Gregg R Rep ep epair air Service accepted tthe he seller’ seller’ss counteroff counteroffe e r of $127 $127,000. ,000. On June 20, the land was as assessed sessed at a vvalue alue of $88,000 ffor or property tax purposes. On August 4 4,, Gregg R Repair epair Service was of offered fered $150 $150,000 ,000 for the land by a national retail chain. A Att what vvalue alue should the land be recorde recorded d in Gregg R Repair epair Service’ Service’ss records?

1. $115,000 2. $88,000 3. $140,000 4. $127,000 Most businesses in the Unite United d States are

1. proprietorships 2. partnerships 3. corporations 4. separate entities Earning revenue

1. increases assets, increases stockholders’ equity 2. increases assets, decreases stockholders’ equity 3. increases one asset, decreases another asset 4. decreases assets, increases liabilities The monetary vvalue alue charged to ccustomers ustomers for the perf performance ormance of services sold is called a(n)

1. asset 2. net income 3. capital 4. revenue Re Revenues venues are reported w when hen

1. a contract is signed 2. cash is received from the customer 3. work is begun on the job 4. work is completed on the job

Expenses are recorded w wh hen

1. cash is paid for services rendered 2. a bill is received in advance of services rendered 3. assets are used in the process of earning revenue 4. none of these Goods purchased on account account for future future use in the business, such as supplies, are called

1. prepaid liabilities 2. revenues 3. prepaid expenses 4. liabilities The asset created by a busi business ness when it makes a sale o on n account is termed

1. accounts payable 2. prepaid expense 3. unearned revenue 4. accounts receivable The debt created by a busines businesss when it makes a pu purchase rchase on account is re referred ferred to as an

1. account payable 2. account receivable 3. asset 4. expense payable If total assets decreased by $8 $88,000 8,000 during a period of tim time e and stockholders’ equit equityy increased by $65,000 during the same period period,, then the amount and directi direction on (increase or decrea decrease) se) of the period's change in total liabilities is

1. $23,000 increase 2. $88,000 decrease 3. $153,000 increase 4. $153,000 decrease

Declaring and payi paying ng cash dividends

1. increase expenses 2. decrease expenses 3. increase cash 4. decrease stockholders’ equity How does paying a liability liability in cash affect affect the accounting equation?

1. assets increase; liabilities decrease 2. assets increase; liabilities increase 3. assets decrease; liabilities decrease 4. liabilities decrease; stockholders’ equity increases How does receiving a bill to be paid next month ffor or services rendered af affect fect the acc accounting ounting equation?

1. assets decrease; stockholders’ equity decreases 2. assets increase; liabilities increase 3. liabilities increase; stockholders’ equity increases 4. liabilities increase; stockholders’ equity decreases How does the purchase of eq equipment uipment by signing a note af afffect the accounting equation?

1. assets increase; assets decrease 2. assets increase; liabilities decrease 3. assets increase; liabilities increase 4. assets increase; stockholders’ equity increases Land, originally purchased ffor or $20,000, is sold for $75,000 in cash. What is the eff effe e ct of the sale on the accounting equation?

1. assets increase $75,000; stockholders’ equity increases $75,000 2. assets increase $55,000; stockholders’ equity increases $55,000 3. assets increase $75,000; liabilities decrease $20,000; stockholders’ equity increases $55,000 4. assets increase $20,000; no change for liabilities; stockholders’ equity increases $75,000

Allen Marks is the sole stockholder of Great Marks Company Company.. As of the end of its accounting pe period, riod, December 31, 2011, Great Marks Com Company pany has assets of $940 $940,000 ,000 and liabilities of $300,000. During 2012, Allen Marks purc purchased hased an additional $65,000 of cap capital ital stock and received $4 $45,000 5,000 in cash dividends from tthe he business. What is the amou amount nt of net income during 2012, assumi assuming ng that as of December 31, 2012, assets were $995,000, and liabilities were $270,000 $270,000??

1. $ 65,000 2. $ 50,000 3. $105,000 4. $370,000 Transactions aff affecting ecting stockholders’ equity include

1. shares of capital stock issued to stockholders and payment of liabilities 2. shares of capital stock issued to stockholders, dividends declared and paid to stockholders, revenues, and expenses 3. shares of capital stock issued to stockholders, revenues, expenses, and collection of accounts receivable 4. dividends declared and paid to stockholders, revenues, expenses, and purchases of supplies on account Clifford Moo Moore re purchased $15,000 of Star T Tech ech stock for ccash. ash. Star T Tech ech would

1. increase Assets (Cash) and increase Liabilities (Accounts Payable) 2. increase Assets (Cash) and increase Stockholders’ Equity (Capital Stock) 3. Increase Assets (Accounts Receivable) and decrease Liabilities (Accounts Payable) 4. Increase Assets (Cash) and increase Assets (Accounts Receivable) Gomez Service Company paid its ffirst irst installment on a note pa payyable in the amount of $2,000. How will this tran transaction saction affect the ac accounting counting equation?

1. Increase Liabilities (Notes Payable) and decrease Assets (Cash) 2. Decrease Assets (Cash) and decrease Stockholders’ Equity (Note Payable Expense) 3. Decrease Assets (Cash) and decrease Assets (Notes Receivable) 4. Decrease Assets (Cash) and decrease Liabilities (Notes Payable)

Ramos R Repair epair Company paid $750 in dividends to its stock stockholders. holders. How does this tr transaction ansaction affect Ramos R Repair epair Company Company’’s accounting equation?

1. Increase Assets (Accounts Receivable) and decrease Assets (Cash) 2. Decrease Assets (Cash) and decrease Stockholders’ Equity (Dividends) 3. Decrease Assets (Cash) and decrease Liabilities (Accounts Payable) 4. Increase Assets (Cash) and decrease Stockholders’ Equity (Dividends) Which of the ffollowing ollowing is not a business tr transaction? ansaction?

1. Erin Adams receives stock in exchange for depositing $15,000 in a bank account in the name of Erin’s Lawn Service. 2. Erin’s Lawn Service provided services to customers earning fees of $600. 3. Erin Adams purchased hedge trimmers for her lawn service, agreeing to pay the supplier next m...