Question 1

Owners of business firms are the only people who need accounting information.

Accepted Answer

A) True 
 B)False  False

Question 2

A business organized as a corporation

Accepted Answer

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. 
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. C

Question 3

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. Stockholders' equity at the end of the year was

Accepted Answer

A) $200,000. 
B) $100,000. 
C) $250,000. 
D) $300,000. 
A) $200,000. 
B) $100,000. 
C) $250,000. 
D) $300,000. C

Question 4

Owner's equity is best depicted by the following:

Accepted Answer

A) Assets = Liabilities. 
B) Liabilities + Assets. 
C) Residual equity + Assets. 
D) Assets - Liabilities. 
A) Assets = Liabilities. 
B) Liabilities + Assets. 
C) Residual equity + Assets. 
D) Assets - Liabilities.

Question 5

Ted Leo is the proprietor (owner) of Ted's, a retailer of golf apparel. When recording the financial transactions of Ted's, Ted does not record an entry for a car he purchased for personal use. Ted took out a personal loan to pay for the car. What accounting concept guides Ted's behavior in this situation?

Accepted Answer

A) Pay back concept 
B) Economic entity assumption 
C) Cash basis concept 
D) Monetary unit assumption 
A) Pay back concept 
B) Economic entity assumption 
C) Cash basis concept 
D) Monetary unit assumption

Question 6

Which of the following is not an advantage of the corporate form of business organization?

Accepted Answer

A) Limited liability of stockholders 
B) Transferability of ownership 
C) Unlimited personal liability for stockholders 
D) Unlimited life 
A) Limited liability of stockholders 
B) Transferability of ownership 
C) Unlimited personal liability for stockholders 
D) Unlimited life

Question 7

Which of the following would not be considered an internal user of accounting data for the GHI Company?

Accepted Answer

A) President of the company. 
B) Production manager. 
C) Merchandise inventory clerk. 
D) President of the employees' labor union. 
A) President of the company. 
B) Production manager. 
C) Merchandise inventory clerk. 
D) President of the employees' labor union.

Question 8

The concern about international companies adopting SOX-type standards centers on

Accepted Answer

A) cost-benefit analysis. 
B) ethics issues. 
C) the governing authorities. 
D) comparability. 
A) cost-benefit analysis. 
B) ethics issues. 
C) the governing authorities. 
D) comparability.

Question 9

If the transaction causes an asset account to decrease, which of the following related effects may occur?

Accepted Answer

A) An increase of equal amount in the common stock account. 
B) An increase in a liability account. 
C) An increase of equal amount in another asset account. 
D) An increase in the combined total of liabilities and stockholders' equity. 
A) An increase of equal amount in the common stock account. 
B) An increase in a liability account. 
C) An increase of equal amount in another asset account. 
D) An increase in the combined total of liabilities and stockholders' equity.

Question 10

Accountants rely on a fundamental business concept-ethical behavior-in reporting financial information.

Accepted Answer

A) True 
 B)False

Question 11

The common characteristic possessed by all assets is

Accepted Answer

A) long life. 
B) great monetary value. 
C) tangible nature. 
D) future economic benefit. 
A) long life. 
B) great monetary value. 
C) tangible nature. 
D) future economic benefit.

Question 12

An income statement

Accepted Answer

A) summarizes the changes in retained earnings for a specific period of time. 
B) reports the changes in assets, liabilities, and stockholders' equity over a period of time. 
C) reports the assets, liabilities, and stockholders' equity at a specific date. 
D) presents the revenues and expenses for a specific period of time. 
A) summarizes the changes in retained earnings for a specific period of time. 
B) reports the changes in assets, liabilities, and stockholders' equity over a period of time. 
C) reports the assets, liabilities, and stockholders' equity at a specific date. 
D) presents the revenues and expenses for a specific period of time.

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

The use of computers in recording business events

Accepted Answer

A) has made the recording process more efficient. 
B) does not use the same principles as manual accounting systems. 
C) has greatly impacted the identification stage of the accounting process. 
D) is economical only for large businesses. 
A) has made the recording process more efficient. 
B) does not use the same principles as manual accounting systems. 
C) has greatly impacted the identification stage of the accounting process. 
D) is economical only for large businesses.

Question 15

Collection of a $1,000 Accounts Receivable

Accepted Answer

A) increases an asset $1,000; decreases an asset $1,000. 
B) increases an asset $1,000; decreases a liability $1,000. 
C) decreases a liability $1,000; increases stockholders' equity $1,000. 
D) decreases an asset $1,000; decreases a liability $1,000. 
A) increases an asset $1,000; decreases an asset $1,000. 
B) increases an asset $1,000; decreases a liability $1,000. 
C) decreases a liability $1,000; increases stockholders' equity $1,000. 
D) decreases an asset $1,000; decreases a liability $1,000.

Question 16

If total assets equal $345,000 and total stockholders' equity equal $140,000, then total liabilities must equal

Accepted Answer

A) $485,000. 
B) $205,000. 
C) $140,000. 
D) There is not enough information given to determine this. 
A) $485,000. 
B) $205,000. 
C) $140,000. 
D) There is not enough information given to determine this.

Question 17

The hiring of a new company president is an economic event recorded by the financial information system.

Accepted Answer

A) True 
 B)False

Question 18

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

Accepted Answer

A) True 
 B)False

Question 19

The economic entity assumption requires that the activities

Accepted Answer

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. 
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.

Question 20

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

Accepted Answer

A) net income is less than dividends. 
B) a net loss is less than dividends. 
C) the company must have sold stock. 
D) net income is greater than dividends. 
A) net income is less than dividends. 
B) a net loss is less than dividends. 
C) the company must have sold stock. 
D) net income is greater than dividends.

Owners of business firms are the only people who need accounting information.

A business organized as a corporation

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. Stockholders' equity at the end of the year was

Owner's equity is best depicted by the following:

Which of the following is not an advantage of the corporate form of business organization?

Which of the following would not be considered an internal user of accounting data for the GHI Company?

The concern about international companies adopting SOX-type standards centers on

If the transaction causes an asset account to decrease, which of the following related effects may occur?

Accountants rely on a fundamental business concept-ethical behavior-in reporting financial information.

The common characteristic possessed by all assets is

An income statement

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.

The use of computers in recording business events

Collection of a $1,000 Accounts Receivable

If total assets equal $345,000 and total stockholders' equity equal $140,000, then total liabilities must equal

The hiring of a new company president is an economic event recorded by the financial information system.

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

The economic entity assumption requires that the activities

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

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 1: Accounting in Action

Owners of business firms are the only people who need accounting information.

A business organized as a corporation

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. Stockholders' equity at the end of the year was

Owner's equity is best depicted by the following:

Which of the following is not an advantage of the corporate form of business organization?

Which of the following would not be considered an internal user of accounting data for the GHI Company?

The concern about international companies adopting SOX-type standards centers on

If the transaction causes an asset account to decrease, which of the following related effects may occur?

Accountants rely on a fundamental business concept-ethical behavior-in reporting financial information.

The common characteristic possessed by all assets is

An income statement

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.

The use of computers in recording business events

Collection of a $1,000 Accounts Receivable

If total assets equal $345,000 and total stockholders' equity equal $140,000, then total liabilities must equal

The hiring of a new company president is an economic event recorded by the financial information system.

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

The economic entity assumption requires that the activities

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

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters