A corporation is a business that is legally separate and distinct from its owners. True False ANSWER: True DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The role of accounting is to provide many different users with financial information to make economic decisions. True False ANSWER: True DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Accounting information users need reports about the economic activities and condition of businesses. True False ANSWER: True DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Managerial accounting information is used by external and internal users equally. True False ANSWER: False DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose ACCT.ACBSP.APC.25 - Managerial Characteristics/Terminology ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where they work.
False ANSWER: False DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic An example of an external user of accounting information is the federal government. True False ANSWER: True DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles. True False ANSWER: True DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The cost concept is the basis for entering the purchase price into the accounting records. True False ANSWER: True DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The unit of measurement concept requires that economic data be recorded in dollars. True False
LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The accounting equation can be expressed as Assets – Liabilities = Stockholders' Equity. True False ANSWER: True DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of stockholders. True False ANSWER: True DIFFICULTY: Challenging Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The stockholders' rights to the assets rank ahead of the creditors' rights to the assets. True False ANSWER: False DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic If the liabilities owed by a business total $300,000 and stockholders' equity is equal to $300,000, then the assets also total $300,000. True False ANSWER: False RATIONALE: Assets = Liabilities + Stockholders’ Equity = $300,000 + $300,000 = $600,000 DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic If total assets decreased by $30,000 during a specific period and stockholders' equity decreased by $35,000 during the same period, the period's change in total liabilities was a $65,000 increase. True False ANSWER: False RATIONALE: Assets = Liabilities + Stockholders’ Equity –$30,000 = Liabilities + (–$35,000) Liabilities = +$5,000 DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same period, the period's change in total stockholders' equity was a $200,000 increase. True False ANSWER: True RATIONALE: Assets = Liabilities + Stockholders’ Equity +$190,000 = –10,000 + Stockholders’ Equity Stockholders’ Equity = +$200,000 DIFFICULTY: Moderate Bloom's: Applying LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic If net income for a company was $50,000, $20,000 in cash dividends were paid and the stockholders invested $10,000 in cash, the stockholders' equity increased by $40,000. True False ANSWER: True RATIONALE: Increase in the stockholders' equity = Net income for the year – Cash dividends + Shareholders' investment = $50,000 – $20,000 + $10,000 = DIFFICULTY: Easy Bloom's: Applying LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic An account receivable is typically classified as a revenue. True False $40,000
ANSWER: False DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.15 - Current Assets Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic An account receivable is a claim against a customer resulting from a sale on account. True False ANSWER: True DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.12 - Receivables Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Paying an account payable increases liabilities and decreases assets. True False ANSWER: False DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.16 - Current Liabilities Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Receiving payments on an account receivable increases both equity and assets. True False ANSWER: False DIFFICULTY: Challenging Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Dividends paid to stockholders decrease assets and increase equity. True False ANSWER: False DIFFICULTY: Moderate Bloom's: Remembering
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The excess of revenue over the expenses incurred in earning the revenue is called capital. True False ANSWER: False DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The primary financial statements of a corporation are the income statement, retained earnings statement, and the balance sheet. True False ANSWER: False DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic An income statement is a summary of the revenues and expenses of a business as of a specific date. True False ANSWER: False DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic A retained earnings statement reports the changes in the retained earnings for a period of time. True False ANSWER: True DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
all are correct ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 - Purpose ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic All of the following are general-purpose financial statements except balance sheet income statement retained earnings statement cash budget ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which of the following is a manufacturing business? General Motors Facebook American Airlines Target ANSWER: a DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which of the following is a service Computers Facebook ANSWER: c DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms Dell
$95,000 $140,000 $115,000 ANSWER: d DIFFICULTY: Moderate Bloom's: Applying LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.13 - Long-term Assets Reporting ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Select the type of business that is most likely to obtain large amounts of resources by issuing stock. partnership corporation proprietorship government entity ANSWER: b DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which of the following is not a characteristic of a corporation? Corporations are organized as a separate legal taxable entity. Ownership is divided into shares of stock. Corporations experience an ease in obtaining large amounts of resources by issuing stock. A corporation’s resources are limited to its individual owners’ resources. ANSWER: d DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms ACCT.ACBSP.APC.20 - Accounting for Corporations ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Within the United States, the dominant body in the primary development of accounting principles is the American Institute of Certified Public Accountants (AICPA) American Accounting Association (AAA) Financial Accounting Standards Board (FASB) Institute of Management Accountants (IMA) ANSWER: c DIFFICULTY: Easy
Crystal Cleaning and the American Red Cross Karen Meyer's personal records and the American Red Cross Karen Meyer's personal records and Crystal Cleaning Karen Meyer's personal records, Crystal Cleaning, and the American Red Cross ANSWER: b DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Equipment with an estimated market value of $30,000 is offered for sale at $45,000. The equipment is acquired for $15,000 in cash and a note payable of $20,000 due in 30 days. The amount used in the buyer's accounting records to record this acquisition is $30,000 $35,000 $15,000 $45,000 ANSWER: b RATIONALE: The amount used in the buyer's accounting records = Amount paid in cash + Amount paid through note payable = $15,000 + $20,000 = DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which one of the following is the authoritative body in the United States having the primary responsibility for developing accounting principles? FASB IRS SEC AICPA ANSWER: a DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which of the following concepts relates to separating the reporting of business and personal economic transactions? cost concept unit of measure concept business entity concept objectivity concept ANSWER: c
Which of the following is not true of accounting principles? Financial accountants follow generally accepted accounting principles (GAAP). Following GAAP allows accounting information users to compare one company to another. A new accounting principle can be adopted with stockholders' approval. The Financial Accounting Standards Board (FASB) has primary responsibility for developing accounting principles. ANSWER: c DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 - GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The initials GAAP stand for General Accounting Procedures Generally Accepted Plans Generally Accepted Accounting Principles Generally Accepted Accounting Practices ANSWER: c DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Assets are always lower than liabilities equal to liabilities less stockholders' equity the same as expenses because they are acquired with cash financed by the stockholders and/or creditors ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Debts owed by a business are referred to as accounts receivables expenses stockholders' equity liabilities ANSWER: d DIFFICULTY: Easy
Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.16 - Current Liabilities Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The accounting equation may be expressed as Assets = Equities − Liabilities Assets + Liabilities = Stockholders' Equity Assets = Revenues − Liabilities Assets − Liabilities = Stockholders' Equity ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which of the following is not an asset? investments cash inventory stockholders' equity ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The assets and liabilities of a company are $128,000 and $84,000, respectively. Stockholders' equity should equal $212,000 $44,000 $128,000 $84,000 ANSWER: b RATIONALE: Assets = Liabilities + Stockholders’ Equity $128,000 = $84,000 + Stockholders’ Equity Stockholders’ Equity = $44,000 DIFFICULTY: Easy Bloom's: Applying LEARNING OBJECTIVES: ACCT.WARD.16.01-03 - 01-03 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
increases assets, decreases stockholders' equity increases one asset, decreases another asset decreases assets, increases liabilities ANSWER: a DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The monetary value charged to customers for the performance of services sold is called a(n) asset net income capital revenue ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Revenues are reported when a contract is signed cash is received from the customer work is begun on the job work is completed on the job ANSWER: d DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Expenses are recorded when cash is paid for services rendered a bill is received in advance of services rendered assets are used in the process of earning revenue assets are purchased ANSWER: c DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.06 - Recording Transactions
ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Goods purchased on account for future use in the business, such as supplies, are called prepaid liabilities revenues prepaid expenses liabilities ANSWER: c DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The asset created by a business when it makes a sale on account is termed accounts payable prepaid expense unearned revenue accounts receivable ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.12 - Receivables Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The debt created by a business when it makes a purchase on account is referred to as an account payable account receivable asset expense payable ANSWER: a DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.16 - Current Liabilities Reporting ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic If total assets decreased by $88,000 during a period of time and stockholders' equity increased by $71,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is a $17,000 increase an $88,000 decrease a $159,000 increase a $159,000 decrease
ANSWER: d RATIONALE: Assets = Liabilities + Stockholders’ Equity –$88,000 = Liabilities + $71,000 Liabilities = –$159,000 DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Cash dividends increase expenses decrease expenses increase cash decrease stockholders' equity ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic How does paying a liability in cash affect the accounting equation? assets increase; liabilities decrease assets increase; liabilities increase assets decrease; liabilities decrease liabilities decrease; stockholders' equity increases ANSWER: c DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic How does receiving a bill to be paid next month for services received affect the accounting equation? assets decrease; stockholders' equity decreases assets increase; liabilities increase liabilities increase; stockholders' equity increases liabilities increase; stockholders' equity decreases ANSWER: d DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic
DIFFICULTY: Challenging Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which of the following is a business inventory on account advertising for upcoming sale employees a raise beginning next month estimate for construction project ANSWER: a DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-04 - LO: 01-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.ACBSP.APC.06 - Recording Transactions ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n) prior period statement retained earnings statement income statement balance sheet ANSWER: c DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Which of the following financial statements reports information as of a specific date? income statement retained earnings statement statement of cash flows balance sheet ANSWER: d DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic give
F. Sony G. Best Buy H. Banana Republic I. H&R Block ANSWER: Merchandising B. Service C. Manufacturing D. Service E. Service/Manufacturing F. Manufacturing G. Merchandising H. Merchandising I. Service DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic What is the major difference between the objective of financial accounting and the objective of managerial accounting? ANSWER: The objective of financial accounting is to provide information for the decision- making needs of external users. The objective of managerial accounting is to provide information for internal users. DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.01 – Purpose ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Give the major disadvantage of disregarding the cost concept and constantly revaluing assets based on appraisals and opinions. ANSWER: Accounting reports would become unstable and unreliable. DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-02 - LO: 01-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic On May 7, Carpet Barn Company offered to pay $83,000 for land that had a selling price of $105,000. On May 15, Carpet Barn accepted a counteroffer of $95,000. On June 5, the land was assessed at a value of $115,000 for property tax purposes. On December 10, Carpet Barn Company was offered $135,000 for the land by another company. At what value should the land be recorded in Carpet Barn Company’s records? ANSWER: $95,000 DIFFICULTY: Easy Bloom's: Applying
Retained earnings, January 1 $20,000 Net income for the year $45,625 Less dividends 38,170 Increase in retained earnings 7,455 Retained earnings, December 31 $27,455 DIFFICULTY: Challenging Bloom's: Applying LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Explain the interrelationship between the balance sheet and the statement of cash flows. ANSWER: The cash reported on the balance sheet is also reported as the end-of-period cash on the statement of cash flows. DIFFICULTY: Moderate Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic From the following list of items taken from Lamar’s accounting records, identify those that would appear on the income statement. (a) Rent expense (b) Land (c) Common stock (d) Fees earned (e) Dividends (f) Wages expense (g) Investment ANSWER: (a), (d), (f) DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Identify which of the following accounts would appear on a balance sheet. (a) Cash (b) Fees earned (c) Common stock (d) Wages payable (e) Rent expense (f) Prepaid advertising (g) Land ANSWER: (a), (c), (d), (f), (g) DIFFICULTY: Easy
ACCREDITING STANDARDS: ACCT.ACBSP.APC.23 - Financial Statement Analysis ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic Match the following business types with each business listed below. Each may be used more than once. Service firm Manufacturing firm Merchandising firm DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-01 - LO: 01-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms ACCT.AICPA.BB.01 – Industry ACCT.AICPA.FN.03 – Measurement BUSPROG: Analytic A tax preparation firm ANSWER: a A law firm ANSWER: a A health club and spa ANSWER: a An automobile dealer ANSWER: c A book publisher ANSWER: b A hospital ANSWER: a A supermarket ANSWER: c A modular homebuilder ANSWER: b A men’s clothing store ANSWER: c A dressmaking company ANSWER: b Match the following characteristics with the form of business entity that best describes it. Each may be used more than once. Proprietorship Partnership Corporation Limited liability company (LLC)
Received utility bill to be paid next month ANSWER: b Contribution of land by stockholder ANSWER: c Paid part of an amount owed to a creditor ANSWER: e Paid cash for the purchase of a one-year insurance policy ANSWER: d Received payment from a customer on account ANSWER: d Payment of dividends ANSWER: f Provided a service to a customer on account ANSWER: c Purchased supplies on credit ANSWER: a Paid wages ANSWER: f Payment for common stock by stockholder ANSWER: c Borrowed money from a bank ANSWER: a Purchased equipment for cash ANSWER: d Received cash for providing services to customers ANSWER: c Used up supplies that were already on hand ANSWER: f Match each of the following characteristics with the financial statement it describes. Each financial statement may be used more than once. Income statement Balance sheet Retained earnings statement Statement of cash flows DIFFICULTY: Easy Bloom's: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.01-05 - LO: 01-05 ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions