test bank Acc ch1 ACCOUNTING IN ACTION
TRUE-FALSE STATEMENTS
1. Owners of business firms are the only people who need accounting information.
2. Transactions that can be measured in dollars and cents are recorded i
...
test bank Acc ch1 ACCOUNTING IN ACTION
TRUE-FALSE STATEMENTS
1. Owners of business firms are the only people who need accounting information.
2. Transactions that can be measured in dollars and cents are recorded in the financial information system.
3. The hiring of a new company president is an economic event recorded by the financial information system.
4. Management of a business enterprise is the major external user of information.
5. Accounting communicates financial information about a business enterprise to both internal and external users.
6. Accounting information is used only by external users with a financial interest in a business enterprise.
7. Financial statements are the major means of communicating accounting information to interested parties.
8. Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process.
9. The origins of accounting are attributed to Luca Pacioli, a famous mathematician.
10. The study of accounting is not useful for a business career unless your career objective is to become an accountant.
11. A working knowledge of accounting is not relevant to a lawyer or an architect.
12. A partnership must have more than one owner.
13. The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities.
14. The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.
15. Accountants rely on a fundamental business concept—ethical behavior—in reporting financial information.
16. The primary accounting standard-setting body in the United States is the International Accounting Standards Board.
17. The Financial Accounting Standards Board is a part of the Securities and Exchange Commission.
18. The Securities and Exchange Commission oversees U.S. financial markets and accounting standard-setting bodies.
19. The cost and fair market value of an asset are the same at the time of acquisition and in all subsequent periods.
20. Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should be kept separate from the personal activities of the owners.
21. In order to possess future service potential, an asset must have physical substance.
22. Owners' claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.
23. The basic accounting equation states that Assets = Liabilities.
24. Accountants record both internal and external transactions.
25. Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.
26. The purchase of store equipment for cash reduces assets and owner's equity by an equal amount.
27. The purchase of office equipment on credit increases total assets and total liabilities.
28. The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company during a period.
29. Net income for the period is determined by subtracting total expenses and drawings from total revenues.
a30. The study of accounting will be useful only if a student is interested in working for a profit- oriented business firm.
a31. Private accountants are accountants who are not employees of business enterprises.
a32. Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs.
33. Identifying is the process of keeping a chronological diary of events measured in dollars and cents.
34. Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation.
35. Accountants do not have to worry about issues of ethics.
36. At the time an asset is acquired, cost and fair value should be the same.
37. The monetary unit assumption requires that all dollar amounts be rounded to the nearest dollar.
38. The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets.
39. External transactions involve economic events between the company and some other enterprise or party.
40. In the owner's equity statement, revenues are listed first, followed by expenses, and net income (or net loss).
Answers to True-False Statements
Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
1. F 7. T 13. T 19. F 25. F a31. F 37. F
2. T 8. F 14. T 20. T 26. F a32. T 38. T
3. F 9. T 15. T 21. F 27. T 33. F 39. T
4. F 10. F 16. F 22. F 28. T 34. F 40. F
5. T 11. F 17. F 23. F 29. F 35. F
6. F 12. T 18. T 24. T a30. F 36. T
MULTIPLE CHOICE QUESTIONS
41. Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.
42. The starting point of the accounting process is
a. communicating information to users.
b. identifying economic events.
c. recording economic events.
d. None of these answers are correct.
43. Communication of economic events is the part of the accounting process that involves
a. identifying economic events.
b. quantifying transactions into dollars and cents.
c. preparing accounting reports.
d. recording and classifying information.
44. Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?
a. The appointment of a new CPA firm to perform an audit.
b. The purchase of a new computer.
c. The sale of store equipment.
d. Payment of income taxes.
45. Interpretation of reported information involves each of the following except
a. limitations of reported data.
b. meaning of reported data.
c. uses of reported data.
d. All of these choices are correct.
46. The accounting process involves all of the following except
a. identifying economic transactions that are relevant to the business.
b. communicating financial information to users by preparing financial reports.
c. recording nonquantifiable economic events.
d. analyzing and interpreting financial reports.
47. The accounting process is correctly sequenced as
a. identification, communication, recording.
b. recording, communication, identification.
c. identification, recording, communication.
d. communication, recording, identification.
48. Which of the following techniques are not used by accountants to interpret and report financial information?
a. Graphs.
b. Special memos for each class of external users.
c. Charts.
d. Ratios.
49. Which of the following would not be considered an internal user of accounting data for the LMN Company?
a. President of the company.
b. Production manager.
c. Merchandise inventory clerk.
d. President of the employees' labor union.
50. Which of the following would not be considered an external user of accounting data for the LMN Company?
a. Internal Revenue Service Agent.
b. Management.
c. Creditors.
d. Customers.
51. Which of the following would not be considered internal users of accounting data for a company?
a. The president of a company.
b. The controller of a company.
c. Creditors of a company.
d. Salesmen of the company.
52. Which of the following is an external user of accounting information?
a. Labor unions.
b. Finance directors.
c. Company officers.
d. Managers.
53. Which one of the following is not an external user of accounting information?
a. Regulatory agencies.
b. Customers.
c. Investors.
d. All of these answers choices are external users.
54. Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?
a. Identification.
b. Communication.
c. Recording.
d. Analysis.
a55. All of the following are services offered by public accountants except
a. budgeting.
b. auditing.
c. tax planning.
d. consulting.
a56. Which list below best describes the major services performed by public accountants?
a. Bookkeeping, mergers, budgets.
b. Employee training, auditing, bookkeeping.
c. Auditing, taxation, management consulting.
d. Cost accounting, production scheduling, recruiting.
a57. Preparing tax returns and engaging in tax planning is performed by
a. public accountants only.
b. private accountants only.
c. both public and private accountants.
d. IRS accountants only.
a58. A private accountant can perform many activities in a business organization but would not
work in
a. budgeting.
b. accounting information systems.
c. external auditing.
d. tax accounting.
59. The origins of accounting are generally attributed to the work of
a. Christopher Columbus.
b. Abner Doubleday.
c. Luca Pacioli.
d. Leonardo da Vinci.
60. Financial accounting provides economic and financial information for all of the following
except
a. creditors.
b. investors.
c. managers.
d. other external users.
61. The final step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. recognize an ethical situation.
c. identify the alternatives and weigh the impact of each alternative on stakeholders.
d. recognize the ethical issues involved.
62. The first step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. identify the alternatives.
c. recognize an ethical situation and the ethical issues involved.
d. weigh the impact of each alternative on various stakeholders.
63. Ethics are the standards of conduct by which one's actions are judged as
a. right or wrong.
b. honest or dishonest.
c. fair or unfair.
d. All of these answer choices are correct.
64. Generally accepted accounting principles are
a. income tax regulations of the Internal Revenue Service.
b. standards that indicate how to report economic events.
c. theories that are based on physical laws of the universe.
d. principles that have been proven correct by academic researchers.
65. The historical cost principle requires that when assets are acquired, they be recorded at
a. appraisal value.
b. cost.
c. market price.
d. book value.
66. The historical cost of an asset and its fair value are
a. never the same.
b. the same when the asset is sold.
c. irrelevant when the asset is used by the business in its operations.
d. the same on the date of acquisition.
67. The body of theory underlying accounting is not based on
a. physical laws of nature.
b. concepts.
c. principles.
d. definitions.
68. The private sector organization involved in developing accounting principles is the
a. Feasible Accounting Standards Body.
b. Financial Accounting Studies Board.
c. Financial Accounting Standards Board.
d. Financial Auditors' Standards Body.
69. The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles. It is true that
a. they are both governmental agencies.
b. the SEC is a private organization of accountants.
c. the SEC often mandates guidelines when no accounting principles exist.
d. the SEC and FASB rarely cooperate in developing accounting standards.
70. GAAP stands for
a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures.
71. Financial information that is capable of making a difference in a decision is
a. faithfully representative.
b. relevant.
c. convergent.
d. generally accepted.
72. The Dulce Company has five plants nationwide that cost a total of $200 million. The current fair value of the plants is $600 million. The plants will be recorded and reported as assets at
a. $200 million.
b. $600 million.
c. $400 million.
d. $800 million.
73. The fair value principle is applied for
a. all assets.
b. current assets.
c. buildings.
d. investment securities.
74. The proprietorship form of business organization
a. must have at least three owners in most states.
b. represents the largest number of businesses in the United States.
c. combines the records of the business with the personal records of the owner.
d. is characterized by a legal distinction between the business as an economic unit and the owner.
75. The economic entity assumption requires that the activities
a. of different entities can be combined if all the entities are corporations.
b. must be reported to the Securities and Exchange Commission.
c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
d. of an entity be kept separate from the activities of its owner.
76. A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of the business.
c. is owned by its stockholders.
d. terminates when one of its original stockholders dies.
77. The partnership form of business organization
a. is a separate legal entity.
b. is a common form of organization for service-type businesses.
c. enjoys an unlimited life.
d. has limited liability.
78. Which of the following is not an advantage of the corporate form of business organization?
a. Limited liability of stockholders
b. Transferability of ownership
c. Unlimited personal liability for stockholders
d. Unlimited life
79. A small neighborhood barber shop that is operated by its owner would likely be organized as a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
80. George and Ringo 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
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
81. Which of the following is true regarding the corporate form of business organization?
a. Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than partnerships and proprietor- ships.
c. The revenues of corporations are greater than the combined revenues of partnerships and proprietorships.
d. Corporations are separate legal entities organized exclusively under federal law.
82. A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the
a. stand alone concept.
b. monetary unit assumption.
c. corporate form of ownership.
d. economic entity assumption.
83. Sam Ryo is the proprietor (owner) of Sam's, a retailer of golf apparel. When recording the financial transactions of Sam's, Sam does not record an entry for a car he purchased for personal use. Sam took out a personal loan to pay for the car. What accounting concept guides Sam's behavior in this situation?
a. Pay back concept
b. Economic entity assumption
c. Cash basis concept
d. Monetary unit assumption
84. A basic assumption of accounting assumes that the dollar is
a. unrelated to business transactions.
b. a poor measure of economic activities.
c. the common unit of measure for all business transactions.
d. useless in measuring an economic event.
85. The assumption that the unit of measure remains sufficiently constant over time is part of the
a. economic entity assumption.
b. cost principle.
c. historical cost principle.
d. monetary unit assumption.
86. A business whose owners enjoy limited liability is a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.
87. A problem with the monetary unit assumption is that
a. the dollar has not been stable over time.
b. the dollar has been stable over time.
c. the dollar is a common medium of exchange.
d. it is impossible to account for international transactions.
88. The common characteristic possessed by all assets is
a. long life.
b. great monetary value.
c. tangible nature.
d. future economic benefit.
89. Owner's equity is best depicted by the following:
a. Assets = Liabilities.
b. Liabilities + Assets.
c. Residual equity + Assets.
d. Assets – Liabilities.
90. The basic accounting equation may be expressed as
a. Assets = Equities.
b. Assets – Liabilities = Owner's Equity.
c. Assets = Liabilities + Owner's Equity.
d. All of these answer choices are correct..
91. Liabilities
a. are future economic benefits.
b. are existing debts and obligations.
c. possess service potential.
d. are things of value used by the business in its operation.
92. Liabilities of a company would not include
a. notes payable.
b. accounts payable.
c. salaries and wages payable.
d. cash.
93. Liabilities of a company are owed to
a. debtors.
b. benefactors.
c. creditors.
d. underwriters.
94. Owner's equity can be described as
a. creditorship claim on total assets.
b. ownership claim on total assets.
c. benefactor's claim on total assets.
d. debtor claim on total assets.
95. Owner's equity is often referred to as
a. residual equity.
b. leftovers.
c. spoils.
d. second equity.
96. When an owner withdraws cash or other assets from a business for personal use, these withdrawals are termed
a. depletions.
b. consumptions.
c. drawings.
d. a credit line.
97. Capital is
a. an owner's permanent investment in the business.
b. equal to liabilities minus owner's equity.
c. equal to assets minus owner's equity.
d. equal to liabilities plus drawings.
98. Revenues would not result from
a. sale of merchandise.
b. initial investment of cash by owner.
c. performance of services.
d. rental of property.
99. Sources of increases to owner's equity are
a. additional investments by owners.
b. purchases of merchandise.
c. withdrawals by the owner.
d. expenses.
100. The basic accounting equation cannot be restated as
a. Assets – Liabilities = Owner's Equity.
b. Assets – Owner's Equity = Liabilities.
c. Owner's Equity + Liabilities = Assets.
d. Assets + Liabilities = Owner's Equity.
101. Owner's equity is decreased by all of the following except
a. owner's investments.
b. owner's withdrawals.
c. expenses.
d. owner's drawings.
102. A net loss will result during a time period when
a. liabilities exceed assets.
b. drawings exceed investments.
c. expenses exceed revenues.
d. revenues exceed expenses.
103. If total liabilities decreased by $40,000 and owner’s equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase
104. If total liabilities decreased by $40,000 and owner’s equity decreased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $70,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $70,000 increase
105. If total liabilities decreased by $60,000 and owner’s equity increased by $30,000 during a
period of time, then total assets must change by what amount and direction during that same period?
a. $90,000 decrease
b. $30,000 decrease
c. $30,000 increase
d. $90,000 increase
106. If total liabilities decreased by $30,000 and owner’s equity decreased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $45,000 decrease
b. $15,000 decrease
c. $15,000 increase
d. $45,000 increase
107. If total liabilities increased by $9,000 during a period of time and owner’s equity decreased by $25,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)
a. $34,000 decrease.
b. $16,000 decrease.
c. $16,000 increase.
d. $34,000 increase.
108. The accounting equation for Cineo Enterprises is as follows:
Assets Liabilities Owner’s Equity
$120,000 = $60,000 + $60,000
If Cineo purchases office equipment on account for $15,000, the accounting equation will change to
Assets Liabilities Owner’s Equity
a. $120,000 = $60,000 + $60,000
b. $135,000 = $60,000 + $75,000
c. $135,000 = $67,500 + $67,500
d. $135,000 = $75,000 + $60,000
109. As of June 30, 2016, Little Giantz Company has assets of $100,000 and owner’s equity of
$60,000. What are the liabilities for Little Giantz Company as of June 30, 2016? a. $40,000
b. $60,000
c. $100,000
d. $160,000
110. Owner's equity is increased by
a. drawings.
b. revenues.
c. expenses.
d. liabilities.
111. Owner's equity is decreased by
a. assets.
b. revenues.
c. expenses.
d. liabilities.
112. If total liabilities increased by $6,000, then
a. assets must have decreased by $6,000.
b. owner's equity must have increased by $6,000.
c. assets must have increased by $6,000, or owner's equity must have decreased by
$6,000.
d. assets and owner's equity each increased by $3,000.
113. Collection of a $1,500 Accounts Receivable
a. increases an asset $1,500; decreases an asset $1,500.
b. increases an asset $1,500; decreases a liability $1,500.
c. decreases a liability $1,500; increases owner's equity $1,500.
d. decreases an asset $1,500; decreases a liability $1,500.
114. Revenues are
a. the cost of assets consumed during the period.
b. gross increases in owner's equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.
115. If an individual asset is increased, then
a. there must be an equal decrease in a specific liability.
b. there must be an equal decrease in owner's equity.
c. there must be an equal decrease in another asset.
d. All of these answer choices are possible.
116. If services are rendered for credit, then
a. assets will decrease.
b. liabilities will increase.
c. owner's equity will increase.
d. liabilities will decrease.
117. If expenses are paid in cash, then
a. assets will increase.
b. liabilities will decrease.
c. owner's equity will increase.
d. assets will decrease.
118. If an owner makes a withdrawal of cash from a proprietorship, then
a. there has been a violation of accounting principles.
b. owner's equity will increase.
c. owner's equity will decrease.
d. there will be a new liability showing the owner owes money to the business.
119. If supplies that have been purchased are used in the course of business, then
a. a liability will increase.
b. an asset will increase.
c. owner's equity will decrease.
d. owner's equity will increase.
120. As of December 31, 2016, Cancon Company has assets of $42,000 and owner's equity of
$22,000. What are the liabilities for Cancon Company as of December 31, 2016? a. $22,000.
b. $20,000.
c. $42,000.
d. $64,000.
121. Which of the following events is not a business transaction?
a. Investment of cash by the owner.
b. Hired employees.
c. Incurred utility expenses for the month.
d. Earned revenue for services provided.
122. Net income results when
a. Assets > Liabilities.
b. Revenues = Expenses.
c. Revenues > Expenses.
d. Revenues < Expenses.
123. Owner's capital at the end of the period is equal to
a. owner's capital at the beginning of the period plus net income minus liabilities.
b. owner's capital at the beginning of the period plus net income minus drawings.
c. net income.
d. assets plus liabilities.
124. A balance sheet shows
a. revenues, liabilities, and owner's equity.
b. expenses, drawings, and owner's equity.
c. revenues, expenses, and drawings.
d. assets, liabilities, and owner's equity.
125. An income statement
a. summarizes the changes in owner's equity for a specific period of time.
b. reports the changes in assets, liabilities, and owner's equity over a period of time.
c. reports the assets, liabilities, and owner's equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
126. If owner's equity increases from the beginning of the year to the end of the year, then
a. net income is less than owner drawings.
b. a net loss is less than owner drawings.
c. additional owner investments are less than net losses.
d. net income plus investments is greater than owner drawings.
127. Eli’s Electronic Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $400,000 in electronic repair revenues, $300,000 in expenses, and Eli withdrew $50,000. Eli's Owner’s Capital balance at the end of the year was
a. $200,000.
b. $100,000.
c. $150,000.
d. $350,000.
128. Eli’s Electronic Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $400,000 in electronic repair revenues, $300,000 in expenses, and Eli withdrew $50,000. The net income reported by Eli's Electronic Repair Shop for the year was
a. $100,000.
b. $150,000.
c. $250,000.
d. $300,000.
129. Eli’s Electronic Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $400,000 in electronic repair revenues, $300,000 in expenses, and Eli withdrew $50,000. Eli's Owner’s Capital balance changed by what amount from the beginning of the year to the end of the year?
a. $100,000.
b. $ 50,000.
c. $200,000.
d. $250,000.
130. The balance sheet is frequently referred to as
a. an operating statement.
b. the statement of financial position.
c. the statement of cash flows.
d. the statement of owner's equity.
131. The primary purpose of the statement of cash flows is to report
a. a company's investing transactions.
b. a company's financing transactions.
c. information about cash receipts and cash payments of a company.
d. the net increase or decrease in cash.
132. All of the financial statements are for a period of time except the
a. income statement.
b. owner's equity statement.
c. balance sheet.
d. statement of cash flows.
133. The ending owner's equity amount is shown on
a. the balance sheet only.
b. the owner's equity statement only.
c. both the income statement and the owner's equity statement.
d. both the balance sheet and the owner's equity statement.
134. Alicia Keyes Company began the year with owner’s equity of $280,000. During the year, the company recorded revenues of $375,000, expenses of $265,000, and had owner drawings of $30,000. What was Alicia Keyes’ owner’s equity at the end of the year?
a. $280,000.
b. $360,000.
c. $390,000.
d. $420,000.
135. Martha Innocenzi Ito began the Innocenzi Company by investing $75,000 of cash in the business. The company recorded revenues of $555,000, expenses of $410,000, and had owner drawings of $30,000. What was Innocenzi’s net income for the year?
a. $115,000.
b. $145,000.
c. $175,000.
d. $190,000.
136. El Centro Company began the year with owner’s equity of $30,000. During the year, El Centro received additional owner investments of $42,000, recorded expenses of
$120,000, and had owner drawings of $12,000. If El Centro’s ending owner’s equity was
$112,000, what was the company’s revenue for the year? a. $164,000.
b. $172,000.
c. $202,000.
d. $214,000.
137. Letty Company began the year with owner’s equity of $105,000. During the year, Letty received additional owner investments of $147,000, recorded expenses of $420,000, and had owner drawings of $28,000. If Letty’s ending owner’s equity was $290,000, what was the company’s revenue for the year?
a. $458,000.
b. $486,000.
c. $605,000.
d. $633,000.
138. Foxes Service Shop started the year with total assets of $320,000 and total liabilities of
$240,000. During the year, the business recorded $630,000 in revenues, $450,000 in expenses, and owner drawings of $60,000.
Owner’s equity at the end of the year was a. $80,000.
b. $200,000.
c. $310,000.
d. $370,000.
139. Foxes Service Shop started the year with total assets of $320,000 and total liabilities of
$240,000. During the year, the business recorded $630,000 in revenues, $450,000 in expenses, and owner drawings of $60,000.
The net income reported by Foxes Service Shop for the year was a. $140,000.
b. $180,000.
c. $200,000.
d. $270,000.
140. Mirah Company compiled the following financial information as of December 31, 2016:
Revenues $340,000
Owner’s Capital (1/1/16) 140,000
Equipment 80,000
Expenses 240,000
Cash 90,000
Owner’s Drawings 20,000
Supplies 20,000
Accounts payable 40,000
Accounts receivable 70,000
Mirah’s assets on December 31, 2016 are a. $190,000.
b. $260,000.
c. $360,000. d $480,000.
141. Mirah Company compiled the following financial information as of December 31, 2016:
Revenues $340,000
Owner’s Capital (1/1/16) 140,000
Equipment 80,000
Expenses 240,000
Cash 90,000
Owner’s Drawings 20,000
Supplies 20,000
Accounts payable 40,000
Accounts receivable 70,000
Mirah’s owner’s equity on December 31, 2016 is a. $100,000.
b. $140,000.
c. $220,000.
d. $260,000.
142. Teamboo Company’s owner’s equity at the beginning of August 2016 was $740,000. During the month, the company earned net income of $175,000 and owner’s drawings were $80,000. At the end of August 2016, what is the balance in owner’s equity?
a. $660,000
b. $740,000
c. $820,000
d. $835,000
143. On January 1, 2016, Utah Utility Company reported owner’s equity of $705,000. During the year, the owner withdrew cash of $30,000. At December 31, 2016, the balance in owner’s equity was $795,000. What amount of net income or net loss would the company report for 2016?
a. Net loss of $60,000
b. Net income of $90,000
c. Net income of $120,000
d. Net income of $150,000
144. Luis Consulting started the year with total assets of $60,000 and total liabilities of $17,000. During the year, the business recorded $48,000 in consulting revenues and $36,000 in expenses. Luis made an additional investment of $8,000 and withdrew cash of $9,000 during the year. The owner’s equity at the end of the year was
a. $33,000.
b. $54,000.
c. $57,000.
d. $63,000.
145. Luis Consulting started the year with total assets of $60,000 and total liabilities of $17,000. During the year, the business recorded $48,000 in consulting revenues and $36,000 in expenses. Luis made an additional investment of $8,000 and withdrew cash of $9,000 during the year. The net income reported by Luis Consulting for the year was:
a. $3,000.
b. $12,000.
c. $18,000.
d. $27,000.
146. Luis Consulting started the year with total assets of $60,000 and total liabilities of $17,000. During the year, the business recorded $48,000 in consulting revenues and $36,000 in expenses. Luis made an additional investment of $8,000 and withdrew cash of $9,000 during the year. Owner’s equity changed by what amount from the beginning of the year to the end of the year?
a. $3,000.
b. $11,000.
c. $12,000.
d. $45,000.
147. During the year 2016, Dallas Company earned revenues of $90,000, had expenses of
$62,000, purchased assets with a cost of $10,000 and had owner drawings of $6,000. Net income for the year is
a. $18,000.
b. $22,000.
c. $28,000.
d. $32,000.
148. At October 1, Flambo Company reported owner’s equity of $70,000. During October, no additional investments were made and the company earned net income of $18,000. If owner’s equity at October 31 totals $80,000, what amount of owner drawings were made during the month?
a. $0
b. $8,000
c. $10,000
d. $26,000
149. At October 1, Flambo Company reported owner’s equity of $76,000. During October, no additional investments were made and the company posted a net loss of $8,000. If owner’s equity at October 31 totals $64,000, what amount of owner drawings were made during the month?
a. $0
b. $4,000
c. $8,000
d. $16,000
150. At October 1, Flambo Company reported owner’s equity of $70,000. During October, the owner made additional investments of $4,000 and the company earned net income of
$14,000. If owner’s equity at October 31 totals $78,000, what amount of owner drawings were made during the month?
a. $0
b. $4,000
c. $8,000
d. $10,000
151. At October 1, Flambo Company reported owner’s equity of $68,000. During October, the owner made additional investments of $10,000 and the company posted a net loss of
$4,000. If owner’s equity at October 31 totals $70,000, what amount of owner drawings were made during the month?
a. $0
b. $4,000
c. $6,000
d. $10,000
152. Which of the following is not part of the accounting process?
a. Recording
b. Identifying
c. Financial decision making
d. Communicating
153. The first part of the accounting process is
a. communicating.
b. identifying.
c. processing.
d. recording.
154. Keeping a systematic, chronological diary of events that are measured in dollars and cents is called
a. communicating.
b. identifying.
c. processing.
d. recording.
155. A proprietorship is a business
a. owned by one person.
b. owned by two or more persons.
c. organized as a separate legal entity under state corporation law.
d. owned by a governmental agency.
156. Internal users of accounting information include all of the following except
a. company officers.
b. investors.
c. marketing managers.
d. production supervisors.
157. The organization(s) primarily responsible for establishing generally accepted accounting principles is(are) the
FASB SEC
a. no no
b. yes no
c. no yes
d. yes yes
158. The primary accounting standard-setting body in the United States is the
a. Financial Accounting Standards Board.
b. International Accounting Standards Board.
c. Internal Revenue Service.
d. Securities and Exchange Commission.
159. A net loss will result during a time period when
a. assets exceed liabilities.
b. assets exceed owner's equity.
c. expenses exceed revenues.
d. revenues exceed expenses.
160. Big Bite Diner received a bill of $800 from the Blackstone Wine Advertising Agency. The owner, K. T. Lang, is postponing payment of the bill until a later date. The effect on specific items in the basic accounting equation is
a. a decrease in Cash and an increase in Accounts Payable.
b. a decrease in Cash and an increase in Owner’s Capital.
c. an increase in Accounts Payable and a decrease in Owner’s Capital.
d. a decrease in Accounts Payable and an increase in Owner’s Capital.
161. Mellon Company purchases $1,500 of equipment from Office Equipment Inc. for cash.
The effect on the components of the basic accounting equation of Mellon Company is
a. an increase in assets and liabilities.
b. a decrease in assets and liabilities.
c. no change in total assets.
d. an increase in assets and a decrease in liabilities.
162. Juggernaut Company buys a $29,000 van on credit. The transaction will affect the
a. income statement only.
b. balance sheet only.
c. income statement and owner's equity statement only.
d. income statement, owner's equity statement, and balance sheet.
163. Auditing is
a. the examination of financial statements by a CPA in order to express an opinion on their fairness.
b. a part of accounting that involves only recording of economic events.
c. an area of accounting that involves such activities as cost accounting, budgeting, and accounting information systems.
d. conducted by the Securities and Exchange Commission to ensure that registered financial statements are presented fairly.
164. Which of the following is not a reason one set of international accounting standards are needed?
a. Multinational corporations.
b. Mergers and acquisitions.
c. Information technology.
d. All of these answer choices are reasons one set of international accounting standards are needed.
Reporting
165. Which of the following is not a reason one set of international accounting standards are needed?
a. Multinational corporations.
b. Financial markets.
c. Information technology.
d. All of these answer choices are correct.
166. International standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
167. U.S. standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
168. International standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
169. U.S. standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
170. The United States and the international standard-setting environment are primarily driven by meeting the needs of
a. investors and creditors.
b. tax authorities.
c. central government planners.
d. academic researchers.
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