Question 1

Companies listed on the stock exchanges are regulated by the

Accepted Answer

A)   Financial Accounting Standards Board.
B)   American Institute of Certified Public Accountants.
C)   Securities and Exchange Commission.
D)   Internal Revenue Service. C

Question 2

A partnership is not dissolved when any partner leaves the business or dies.

Accepted Answer

A) True 
 B)False  False

Question 3

Creditors are those who lend money to others or deliver goods and services before being paid.

Accepted Answer

A) True 
 B)False  True

Question 4

Generally accepted accounting principles (GAAP)encompass the conventions,rules,and procedures necessary to define accepted accounting practice at a particular time.

Accepted Answer

A) True 
 B)False

Question 5

Palm Textile Corporation had the following balance sheet accounts and balances: $\begin{array}{lrlr}
\text { Accounts Payable } & \$ 12,000 & \text { Common Stock } & ? \
\text { Accounts Receivable } & 2,000 & \text { Equipment } & \$ 14,000 \
\text { Building } & ? & \text { Land } & 14,000 \
\text { Cash } & 6,000 & \text { Retained Earnings } & 4,000
\end{array}$ If the balance of the Building account were $30,000 and if the equipment were sold for $14,000 cash,what would be the total of stockholders' equity?

Accepted Answer

A)   $54,000
B)   $32,000
C)   $30,000
D)   $66,000

Question 6

Match each definition with the correct term below.

-Retained earnings
A.The group of people who are responsible for ensuring that a company meets its goals of profitability and liquidity.
B.A unit of ownership in a corporation.
C.The inflows and outflows of cash into and out of a business.
D.An information system that measures,processes,and communicates financial information about an economic entity.
E.A set of practices that has been developed to provide guidelines for financial accounting.
F.The value of one currency in terms of another.
G.The government body that regulates the issuing,buying,and selling of stocks in the United States.
H.The ability to earn enough income to attract and hold investment capital.
I.The oversight of a corporation's management and ethics by its board of directors.
J.The accumulated earnings generated by a business's income-producing activities less amounts that have been paid out to the stockholder's.
k.KEconomic events that affect a business's financial position.
L.An examination of a company's financial statements and the accounting systems,controls,and records that produced them.

Accepted Answer

The answer of Match each definition with the correct term...

Question 7

Exchange rates for currency change daily according to the supply and demand for each currency.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a regulatory agency?

Accepted Answer

A)   International Accounting Standards Board (IAS
B)  
B)   Securities and Exchange Commission (SE
C)  
C)   Financial Accounting Standards Board (FAS
B)  
D)   Governmental Accounting Standards Board (GAS
B)

Question 9

A primary user of accounting information with a direct financial interest in the business is a(n)

Accepted Answer

A)   regulatory agency.
B)   investor
C)   taxing authority.
D)   customer

Question 10

Which of the following financial ratios has not been shown to be most predictive of company performance?

Accepted Answer

A)   Debt to equity ratio
B)   Inventory turnover
C)   Profit margin
D)   Cash flow yield

Question 11

Profitability means having enough funds on hand to pay debts when they fall due.

Accepted Answer

A) True 
 B)False

Question 12

Match each definition with the correct term below.

-Exchange rate
A.The group of people who are responsible for ensuring that a company meets its goals of profitability and liquidity.
B.A unit of ownership in a corporation.
C.The inflows and outflows of cash into and out of a business.
D.An information system that measures,processes,and communicates financial information about an economic entity.
E.A set of practices that has been developed to provide guidelines for financial accounting.
F.The value of one currency in terms of another.
G.The government body that regulates the issuing,buying,and selling of stocks in the United States.
H.The ability to earn enough income to attract and hold investment capital.
I.The oversight of a corporation's management and ethics by its board of directors.
J.The accumulated earnings generated by a business's income-producing activities less amounts that have been paid out to the stockholder's.
k.KEconomic events that affect a business's financial position.
L.An examination of a company's financial statements and the accounting systems,controls,and records that produced them.

Accepted Answer

The answer of Match each definition with the correct term...

Question 13

All public accountants but not management accountants are required to adhere to a code of professional conduct.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following assets could be described as nonphysical?

Accepted Answer

A)   Land
B)   Inventory
C)   Patents
D)   Equipment

Question 15

The statement of retained earnings relates the income statement to the balance sheet by showing how the Retained Earnings account changed during the accounting period.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following transactions involves an exchange of value?

Accepted Answer

A)   Accumulation of interest
B)   Sale of services
C)   Flood loss
D)   Wear and tear on equipment

Question 17

At the beginning of the year,Catoosa Corporation's assets were $300,000 and its stockholders' equity was $200,000.During the year,assets decreased $60,000 and liabilities increased $30,000.What was the stockholders' equity at the end of the year?

Accepted Answer

The answer of At the beginning of the year,Catoosa Corporation's...

Question 18

Match each definition with the correct term below.

-Share of stock
A.The group of people who are responsible for ensuring that a company meets its goals of profitability and liquidity.
B.A unit of ownership in a corporation.
C.The inflows and outflows of cash into and out of a business.
D.An information system that measures,processes,and communicates financial information about an economic entity.
E.A set of practices that has been developed to provide guidelines for financial accounting.
F.The value of one currency in terms of another.
G.The government body that regulates the issuing,buying,and selling of stocks in the United States.
H.The ability to earn enough income to attract and hold investment capital.
I.The oversight of a corporation's management and ethics by its board of directors.
J.The accumulated earnings generated by a business's income-producing activities less amounts that have been paid out to the stockholder's.
k.KEconomic events that affect a business's financial position.
L.An examination of a company's financial statements and the accounting systems,controls,and records that produced them.

Accepted Answer

The answer of Match each definition with the correct term...

Question 19

Objectivity means carrying out one's professional responsibilities with competence and diligence.

Accepted Answer

A) True 
 B)False

Question 20

The purpose of an audit is to

Accepted Answer

A)   determine whether or not a company is a good investment.
B)   comply with income tax regulations.
C)   determine whether or not a company is a good credit risk.
D)   ascertain that the financial statements follow Generally Accepted Accounting Principles (GAAP) .

Exam 1: Uses of Accounting Information and the Financial Statements

Companies listed on the stock exchanges are regulated by the

A partnership is not dissolved when any partner leaves the business or dies.

Creditors are those who lend money to others or deliver goods and services before being paid.

Generally accepted accounting principles (GAAP)encompass the conventions,rules,and procedures necessary to define accepted accounting practice at a particular time.

Exchange rates for currency change daily according to the supply and demand for each currency.

Which of the following is a regulatory agency?

A primary user of accounting information with a direct financial interest in the business is a(n)

Which of the following financial ratios has not been shown to be most predictive of company performance?

Profitability means having enough funds on hand to pay debts when they fall due.

All public accountants but not management accountants are required to adhere to a code of professional conduct.

Which of the following assets could be described as nonphysical?

The statement of retained earnings relates the income statement to the balance sheet by showing how the Retained Earnings account changed during the accounting period.

Which of the following transactions involves an exchange of value?

At the beginning of the year,Catoosa Corporation's assets were $300,000 and its stockholders' equity was $200,000.During the year,assets decreased $60,000 and liabilities increased $30,000.What was the stockholders' equity at the end of the year?

Objectivity means carrying out one's professional responsibilities with competence and diligence.

The purpose of an audit is to