Question 1

The guidelines for accounting information are called Generally Accepted Accounting Principles (GAAP).

Accepted Answer

A) True 
 B)False

Question 2

Following is a list of account balances of Wilson Mowing Service as of December 31 of the first year of operation:   At the end of the year, what is the amount of total liabilities?

Accepted Answer

A) $12,400 
B) $24,100 
C) $21,200 
D) $12,200 
A) $12,400 
B) $24,100 
C) $21,200 
D) $12,200

Question 3

In a limited-liability company:

Accepted Answer

A) the members are personally liable to pay the entity's debts. 
B) tax on earnings is paid by the business. 
C) the members are liable for each other's actions. 
D) the members pay tax on their share of earnings. 
A) the members are personally liable to pay the entity's debts. 
B) tax on earnings is paid by the business. 
C) the members are liable for each other's actions. 
D) the members pay tax on their share of earnings.

Question 4

Venus Inc. paid $5,000 for account payable. How does this transaction affect the accounting equation of Venus?

Accepted Answer

A) Assets decrease by $5,000 and equity increases by $5,000. 
B) Assets decrease by $5,000 and liabilities decrease by $5,000. 
C) Assets increase by $5,000 and equity decreases by $5,000. 
D) Assets increase by $5,000 and liabilities increase by $5,000. 
A) Assets decrease by $5,000 and equity increases by $5,000. 
B) Assets decrease by $5,000 and liabilities decrease by $5,000. 
C) Assets increase by $5,000 and equity decreases by $5,000. 
D) Assets increase by $5,000 and liabilities increase by $5,000.

Question 5

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

Accepted Answer

A) Securities and Exchange Commission (SE
C)  
B) Public Company Accounting Oversight Board (PCAO
B)  
C) Financial Accounting Standards Board (FAS
B)  
D) American Institute of Certified Public Accountants (AICP
A)  
A) Securities and Exchange Commission (SE
C)  
B) Public Company Accounting Oversight Board (PCAO
B)  
C) Financial Accounting Standards Board (FAS
B)  
D) American Institute of Certified Public Accountants (AICP
A)

Question 6

Which of the following items is included in the headings of the financial statements?

Accepted Answer

A) date and time of filing tax returns 
B) place and time of preparation of the statement 
C) name of the preparer of the statement 
D) name of the business 
A) date and time of filing tax returns 
B) place and time of preparation of the statement 
C) name of the preparer of the statement 
D) name of the business

Question 7

A creditor is any person who has an ownership interest in a business.

Accepted Answer

A) True 
 B)False

Question 8

Lush Lawns earned $1,000 for lawn mowing services rendered. The customer promised to pay at a later time. Which of the following accounts increased as a result of this transaction?

Accepted Answer

A) Accounts payable 
B) Supplies 
C) Cash 
D) Accounts receivable 
A) Accounts payable 
B) Supplies 
C) Cash 
D) Accounts receivable

Question 9

Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

Accepted Answer

A) True 
 B)False

Question 10

Scott's Camera Shop started the year with total assets of $100,000 and total liabilities of $50,000. During the year, the business earned revenues of $200,000 and incurred expenses of $60,000. Scott made no capital contributions during the year, but did make withdrawals of $75,000. Calculate the amount of increase/decrease in Scott's equity for the year.

Accepted Answer

A) $65,000 increase 
B) $115,000 increase 
C) $50,000 decrease 
D) $75,000 increase 
A) $65,000 increase 
B) $115,000 increase 
C) $50,000 decrease 
D) $75,000 increase

Question 11

The amount of net income is transferred from ________ to ________.

Accepted Answer

A) the income statement; the statement of owner's equity 
B) the balance sheet; the statement of cash flow 
C) the balance sheet; the income statement 
D) the income statement; the statement of expenditures 
A) the income statement; the statement of owner's equity 
B) the balance sheet; the statement of cash flow 
C) the balance sheet; the income statement 
D) the income statement; the statement of expenditures

Question 12

The net income of Edwards Inc. amounted to $74,000 for this year. The beginning balance of Owner's Capital account was $32,000 and the ending balance was $75,000. No additional contributions to capital were made during the year. What was the amount of his withdrawals during the year?

Accepted Answer

A) $75,000 
B) $31,000 
C) $149,000 
D) $32,000 
A) $75,000 
B) $31,000 
C) $149,000 
D) $32,000

Question 13

Assume MetAmbit Inc. had net income of $2,500 for the year ending December, 2014. Its beginning and ending total assets were $35,500 and $20,500, respectively. Calculate MetAmbit's return on assets (ROA). (Round your percentage answer to two decimal places.)

Accepted Answer

A) 12.57% 
B) 5.85% 
C) 8.93% 
D) 9.50% 
A) 12.57% 
B) 5.85% 
C) 8.93% 
D) 9.50%

Question 14

International Financial Reporting Standards (IFRS)are the international accounting rules that U.S. companies must follow for their international operations.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following formulae is used to calculate average total assets for the return on assets ratio?

Accepted Answer

A) Average total assets = (Beginning total assets + Ending total assets)× 2 
B) Average total assets = (Beginning total assets - Ending total assets)× 2 
C) Average total assets = (Beginning total assets - Ending total assets)÷ 2 
D) Average total assets = (Beginning total assets + Ending total assets)÷ 2 
A) Average total assets = (Beginning total assets + Ending total assets)× 2 
B) Average total assets = (Beginning total assets - Ending total assets)× 2 
C) Average total assets = (Beginning total assets - Ending total assets)÷ 2 
D) Average total assets = (Beginning total assets + Ending total assets)÷ 2

Question 16

The most that the owner of a sole proprietorship can lose, as a result of business debts or lawsuits, is the amount he/she has invested in the business.

Accepted Answer

A) True 
 B)False

Question 17

A business can be organized as a sole proprietorship, partnership, corporation, or limited-liability company (LLC).

Accepted Answer

A) True 
 B)False

Question 18

Accounting is referred to as the language of business because it is the method of communicating business information to stakeholders.

Accepted Answer

A) True 
 B)False

Question 19

The statement of cash flows informs users about how much of the earnings were kept and reinvested in the company.

Accepted Answer

A) True 
 B)False

Question 20

________ are professional accountants who serve the general public, not one particular company.

Accepted Answer

A) Certified public accountants 
B) Certified management accountants 
C) Cost accountants 
D) Controllers 
A) Certified public accountants 
B) Certified management accountants 
C) Cost accountants 
D) Controllers

Exam 1: Accounting and the Business Environment

The guidelines for accounting information are called Generally Accepted Accounting Principles (GAAP).

Following is a list of account balances of Wilson Mowing Service as of December 31 of the first year of operation: At the end of the year, what is the amount of total liabilities?

In a limited-liability company:

Venus Inc. paid $5,000 for account payable. How does this transaction affect the accounting equation of Venus?

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

Which of the following items is included in the headings of the financial statements?

A creditor is any person who has an ownership interest in a business.

Lush Lawns earned $1,000 for lawn mowing services rendered. The customer promised to pay at a later time. Which of the following accounts increased as a result of this transaction?

Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

The amount of net income is transferred from ________ to ________.

The net income of Edwards Inc. amounted to $74,000 for this year. The beginning balance of Owner's Capital account was $32,000 and the ending balance was $75,000. No additional contributions to capital were made during the year. What was the amount of his withdrawals during the year?

Assume MetAmbit Inc. had net income of $2,500 for the year ending December, 2014. Its beginning and ending total assets were $35,500 and $20,500, respectively. Calculate MetAmbit's return on assets (ROA). (Round your percentage answer to two decimal places.)

International Financial Reporting Standards (IFRS)are the international accounting rules that U.S. companies must follow for their international operations.

Which of the following formulae is used to calculate average total assets for the return on assets ratio?

The most that the owner of a sole proprietorship can lose, as a result of business debts or lawsuits, is the amount he/she has invested in the business.

A business can be organized as a sole proprietorship, partnership, corporation, or limited-liability company (LLC).

Accounting is referred to as the language of business because it is the method of communicating business information to stakeholders.

The statement of cash flows informs users about how much of the earnings were kept and reinvested in the company.

________ are professional accountants who serve the general public, not one particular company.

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

The amount of net income is transferred from to .