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| 1 | |
Which one of the following transactions is not possible? |
| | A) | A transaction which both increases assets and increases liabilities for the same amount. |
| | B) | A transaction which both increases liabilities and increases equity for the same amount. |
| | C) | A transaction which both increases assets and decreases assets for the same amount. |
| | D) | A transaction which both decreases liabilities and decreases assets for the same amount. |
| | E) | All of the above transactions are possible. |
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| 2 | |
Three key activities of the accounting function are identifying transactions, recording transactions, and communicating transactions. The proper order for these activities is considered to be which of the following? |
| | A) | Communicating, recording, and identifying. |
| | B) | Recording, communicating, and identifying. |
| | C) | Identifying, communicating, and recording. |
| | D) | Identifying, recording, and communicating. |
| | E) | None of the above |
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| 3 | |
Which one of the following users of accounting information is considered to be an external user of accounting information rather than an internal user of accounting information? |
| | A) | Sales staff. |
| | B) | Company managers. |
| | C) | Company Customers |
| | D) | Officers and directors. |
| | E) | Budget officers. |
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| 4 | |
All of the following people can properly be called managers. Which one of the following individuals is not considered an internal user of accounting information? |
| | A) | Service manager. |
| | B) | Research and development manager. |
| | C) | Production manager. |
| | D) | Partner in CPA firm charged with conducting the company's external audit. |
| | E) | Human resources manager. |
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| 5 | |
There are three main areas in which trained accountants find jobs. These three areas are (1) private accounting, (2) public accounting, and (3) government, not-for-profit accounting, and education. Which one of these areas has the most accounting jobs at the present time and what percentage of the job market is represented by this area? |
| | A) | Private accounting has the most jobs at the present time and this area represents 40% of the present job market. |
| | B) | Private accounting has the most jobs at the present time and this area represents 60% of the present job market. |
| | C) | Public accounting has the most jobs at the present time and this area represents 60% of the present job market. |
| | D) | Public accounting has the most jobs at the present time and this area represents 40% of the present job market. |
| | E) | The government, not-for-profit, and education sector of accounting has the most jobs at the present time and this area represents 60% of the present job market. |
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| 6 | |
A college student pays $150 cash for her textbook. In the student's opinion, the textbook is worth $50. In accounting, however, the value of the textbook is assumed to be and is recorded at the $150 amount. The accounting principle that is most demonstrated by this example is? |
| | A) | The cost principle. |
| | B) | The going-concern principle. |
| | C) | The business entity principle. |
| | D) | The monetary unit principle. |
| | E) | The conservatism principle. |
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| 7 | |
A CPA owns a large home and she has divided the second floor into two separate units: one used as her personal residence and the other rented out to local college students as an apartment. On the first floor, she has her own CPA firm where she meets with and provides accounting services to clients. If she wishes to keep separate records for each of these three activities, the accounting principle to which she is adhering is? |
| | A) | Going-concern principle. |
| | B) | Monetary unit principle. |
| | C) | Cost principle. |
| | D) | Business entity principle. |
| | E) | Conservatism principle. |
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| 8 | |
The three basic business entities discussed in this chapter were sole proprietorship, partnership, and corporation. Which of these entities is considered a legal entity and is also subject to federal income taxation at the entity level? |
| | A) | Sole proprietorship. |
| | B) | Partnership. |
| | C) | Corporation. |
| | D) | All three entities satisfy both requirements. |
| | E) | None of these entities satisfy both requirements. |
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| 9 | |
The basic accounting equation is Assets = Liabilities + Equity. The Equity term of the equation can be further broken down into several other terms. Assume that the entity is a sole proprietorship. Which of the following statements is correct? |
| | A) | Additional investments by the business owner will increase equity; and revenues will decrease equity. |
| | B) | Additional investments by the business owner will decrease equity; and revenues will increase equity. |
| | C) | Increases in expenses will decrease equity; and owner withdrawals will decrease equity. |
| | D) | Revenues will increase equity; and owner withdrawals will increase equity. |
| | E) | Revenues will decrease equity; and owner withdrawals will increase equity. |
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| 10 | |
What is the relations between net income or net loss for a particular year and the balance in owner's equity at the beginning of the year? Assume the entity is a sole proprietorship. |
| | A) | Net loss is added to beginning owner's equity in calculating ending owner's equity. |
| | B) | Net loss is subtracted from beginning owner's equity in calculating ending owner's equity. |
| | C) | Net income is subtracted from beginning owner's equity in calculating ending owner's equity. |
| | D) | Net income is added to beginning owner's equity in calculating ending owner's equity. |
| | E) | B and D are correct. |
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| 11 | |
If at the end of the accounting period the company's liabilities total $19,000 and its equity totals $40,000, then what must be the total of assets? |
| | A) | $14,000 |
| | B) | $40,000 |
| | C) | $21,000 |
| | D) | $59,000 |
| | E) | None of the above |
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| 12 | |
Company assets total $150,000 and its liabilities total $30,000. What is the equity of this company? |
| | A) | $120,000 |
| | B) | $100,000 |
| | C) | $150,000 |
| | D) | $180,000 |
| | E) | None of the above |
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| 13 | |
If during the current accounting period the company's assets increased by $24,000 and equity increased by $5,000, then how did liabilities change? |
| | A) | Increased by $29,000 |
| | B) | Increased by $24,000 |
| | C) | Decreased by $5,000 |
| | D) | Decreased by $19,000 |
| | E) | Increased by $19,000 |
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| 14 | |
Assume that a company's beginning owner's capital was $20,000. During the period, withdrawals were $24,000, and the owner made additional investments during the period of $50,000. The ending capital balance was $90,000. What was the net income or net loss for the period? |
| | A) | Net income, $56,000 |
| | B) | Net loss, $44,000 |
| | C) | Net income, $44,000 |
| | D) | Net income, $30,000 |
| | E) | None of the above |
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| 15 | |
Assume that total revenues were $115,000, total expenses (excluding wage expense) were $60,000, and net income was $35,000. What was the amount of wage expense? |
| | A) | $15,000 |
| | B) | $20,000 |
| | C) | $55,000 |
| | D) | $70,000 |
| | E) | Cannot be determined from information provided |
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| 16 | |
If during the accounting period the company's assets decreased by $15,000, and equity increased by $4,000, then by how much did liabilities change? |
| | A) | Increased by $12,000 |
| | B) | Increased by $8,000 |
| | C) | Decreased by $12,000 |
| | D) | Decreased by $19,000 |
| | E) | Decreased by $6,000 |
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| 17 | |
If company's cash totals $400,000, its revenues and net income for the period tota $2,750,000, and $350,000, respectively, what is its return on assets if its average total assets is $1,750,000? |
| | A) | 15% |
| | B) | 20% |
| | C) | 25% |
| | D) | 40% |
| | E) | None of the above |
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| 18 | |
Which of the following financial statements refers to a specific date (point in time)? |
| | A) | Income statement |
| | B) | Statement of owner's equity |
| | C) | Statement of cash flows |
| | D) | Balance Sheet |
| | E) | Answers A, B & C are all correct |
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| 19 | |
Which of the following organizations is primarily responsible for setting accounting rules and regulations in the United States? |
| | A) | The U.S. Congress |
| | B) | The SEC |
| | C) | The AICPA |
| | D) | The FASB |
| | E) | Both B and D |
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| 20 | |
Total assets and total liabilities of a company are reported on which of the following? |
| | A) | Income statement |
| | B) | Balance sheet |
| | C) | Statement of cash flows |
| | D) | Statement of owner's equity |
| | E) | None of the above |
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| 21 | |
A statement of cash flows will report cash flows from which of the following activities? |
| | A) | Operating activities |
| | B) | Financing activities |
| | C) | Investing activities |
| | D) | All of the above |
| | E) | Only A and C are correct |
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| 22 | |
When equity (net assets) is subtracted from total assets the amount remaining is known as which of the following? |
| | A) | Total revenue |
| | B) | Total liabilities |
| | C) | Total expenses |
| | D) | Net income or net loss |
| | E) | All of the above |
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| 23 | |
Which line of the following table is incorrect? | Principle | Major Focus or Assumption | | A. | Going-concern principle | A business has an indefinite life span | | B. | Business entity principle | A business is distinct from its owners | | C. | Cost principle | Assets should be recorded at appraised value | | D. | Revenue Recognition Principle | Revenues are recorded when earned | | E. | Objectivity principle | Independent, unbiased evidence should be used |
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| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
| | E) | Line E |
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| 24 | |
When cash is received from a customer in payment for an account receivable, how are the elements of the accounting equation affected? |
| | A) | Decrease assets (cash) and increase assets (accounts receivable) |
| | B) | Increase assets (cash) and decrease assets (accounts receivable) |
| | C) | Increase assets and increase liabilities |
| | D) | Increase assets and increase equity |
| | E) | None of the above |
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| 25 | |
The owner's investment of cash in the company will result in which of the following? |
| | A) | An increase in cash and a decrease in equity |
| | B) | An increase in cash and an increase in equity |
| | C) | A decrease in cash and a decrease in liabilities |
| | D) | An increase in fees earned and an increase in equity |
| | E) | A increase in cash and a increase in liabilities |
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| 26 | |
Purchasing equipment on account (payment to be made in the future) will have what effect on the components of the accounting equation? |
| | A) | Increase in equipment (assets) and a decrease in equity |
| | B) | Increase in equipment (assets) and an increase in equity |
| | C) | Increase in equipment (assets) and an increase in liabilities |
| | D) | Increase in equipment (assets) and a decrease in liabilities |
| | E) | None of the above |
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