60 test bank for survey of accounting 7th edition

60 Test Bank for Survey of Accounting 7th Edition
by Warren Multiple Choice Questions
Heedy Company had the following account balances in 2015 and
2016, respectively. Assuming dividends of $20,000 were paid in
2016, how much was net income? 2016 2015: Capital Stock $
42,000 $ 40,000; Retained Earnings x 210,000; Total
Stockholders’ Equity $ 314,000 $ 250,000
1.

a. $62,000

2.

b. $82,000

3.

c. $272,000

4.

d. $252,000

Univeo, Inc. had revenues of $245,000, expenses of $180,000,
and dividends of $45,000 during 2015. Which of the following
statements is correct?
1.

a. Net income for 2015 totaled $65,000.

2.

b. Net income for 2015 totaled $20,000.

3.

c. Total retained earnings increased by $65,000 during 2015.

4.

d. Total retained earnings decreased by $20,000 during 2015.

Due to various fraudulent business practices and accounting
coverups in the early 2000s, Congress enacted the SarbanesOxley Act of 2002. The act was responsible for establishing a new
oversight board for public accountants called the:
1.

a. Generally Accepted Accounting Practices for Public Accountants Board.

2.

b. Public Company Accounting Oversight Board.

3.

c. Congressional Accounting Oversight Board.

4.

d.Financial Accounting Standards Board.

Governments have an interest in the economic performance of
business because of:
1.

a. tax collections.

2.

b. community involvement from the business.

3.

c. business incentives.

4.

d. all of these.

Given the following list of accounts, calculate Total Assets:
Accounts Receivable $ 10,000; Capital Stock 20,000 Cash
25,300; Equipment 16,800; Fees Earned 44,400; Miscellaneous
Expense 17,800; Rent Expense 3,250; Retained Earnings 7,850;
Salaries Expense 15,400; Wages Expense 15,000;
1.

a. $52,100

2.

b. $55,300

3.

c. $54,600

4.

d. $40,050

A note payable requires payment of the amount borrowed plus:
1.

a. interest.

2.

b. tax.

3.

c. overhead.

4.

d. dividend.

Return on assets of 4.25% implies:
1.

a. $4.25 return on every $100 of total assets.

2.

b. $4.25 return on every $100 of debt.

3.

c. $4.25 return on every $100 of current assets.

4.

d. $4.25 return on every $100 invested to purchase new assets.


_____ is the increase in assets from selling products and
services.
1.

a. Revenue

2.

b. Liabilities

3.

c. Products

4.

d. Stockholders’ Equity

A summary of the cash receipts and cash payments for a specific
period of time is a(n):
1.

a.income statement.

2.

b. balance sheet.

3.

c. statement of cash flows.

4.

d. retained earnings statement.

Cash investments made by the stockholders of the business are
reported on the statement of cash flows in the:
1.

a. financing activities section.

2.

b. investing activities section.

3.

c. operating activities section.

4.

d. supplemental statement.

Cash collected from sales during the normal course of business
would be an example of which type of business activity?
1.

a. Operating

2.

b. Investing

3.

c. Financing

4.

d. None of these

Managers are evaluated primarily on the business's:

1.

a. tax collections.

2.

b. growth.

3.

c. economic performance.

4.

d. all of these.

Profitability ratios such as _____ can be used to analyze and
assess a company’s financial performance.
1.

a. fixed assets turnover

2.

b. current ratios

3.

c. dividend pay out ratios

4.

d. return on assets

Expressing financial data as if a business will continue operating
for an indefinite period time refers to which concept?
1.

a. Business entity concept

2.

b. Going concern concept

3.

c. Objectivity concept

4.

d. Adequate disclosure concept

Financing activities_____ .
1.

a. involve obtaining funds to operate a business

2.

b. involve obtaining assets such as buildings and equipment

3.

c. help to earn revenues and profits

4.

d. help to make wise investments in other companies

A summary of the cash receipts and cash payments for a specific
period of time is a(n):
1.

a. income statement.

2.

b. balance sheet.


3.

c. statement of cash flows.

4.

d. retained earnings statement.

Rights to payments from customers are:
1.

a. liabilities.

2.

b. prepaid expenses.

3.

c. accounts receivable.

4.

d. accounts payable.

Including all relevant data a reader needs to understand the
financial condition and performance of a business refers to which
concept?
1.

a. Adequate disclosure concept

2.

b. Going concern concept

3.

c. Objectivity concept

4.

d. Business entity concept

If there was no beginning retained earnings, net income of
$30,300, and ending retained earnings of $8,000, how much were
dividends?
1.

a. $38,300

2.

b. $22,300

3.

c. $6,000

4.

d. $8,000

From the following information for BlueInks Corporation, compute
the rate on return of assets.Net income after tax $30,548; Taxes
$6,785; Interest expense $3,545; Total assets at beginning of
year $150,500; Total assets at end of year $175,684
1.

a. 20.90%

2.

b. 25.06%

3.

c. 22.89%

4.

d. 18.73%

A corporation is _____.
1.

a.an entity that is organized according to state or federal statutes and in
which ownership is divided into

2.

shares of stock

3.

b. an entity that is owned by an individual

4.

5.

c. an entity which has unlimited liability to creditors for the debts of the
company
d. an entity which has limited access to capital

A summary of changes in the earnings retained by the
corporation for a specific period of time is known as a (n):
1.

a. income statement.

2.

b. balance sheet.

3.

c. statement of cash flows.

4.

d. retained earnings statement.

Debts owed by a business are referred to as:
1.

a. accounts receivable.

2.

b. equities.

3.

c. stockholders’ equity.

4.

d. liabilities.

Capital market stakeholders have an interest in the company
because:
1.

a. they provide incentives for the company to market their products.


2.

b.they are part of the Marketing Department that is responsible for
promoting the products or services to increase the business profits.

3.

c. they help market their products to customers or find vendors to supply
needed inputs.

4.

d. they provide major financing for the business.

A list of assets, liabilities, and owners' equity as of a specific date
is a(n):
1.

a. income statement.

2.

b. balance sheet.

3.

c. statement of cash flows.

4.

d. retained earnings statement.

During 2015, Trinder Corporation had an increase in total assets
of $80,000 and an increase in total liabilities of $60,000.
Assuming that capital stock increased by $8,000 and no
dividends were paid, calculate Trinder’s net income or net loss for
2015.
1.

a. Net income of $12,000

2.

b. Net income of $72,000

3.

c. Net income of $28,000

4.

d. Net loss of $20,000

Tadeo, Inc. had the following account balances at September 30,
2015. What is Tadeo’s net income for the month of September?
Accounts Payable $ 5,800; Capital Stock 12,000; Cash 15,500;
Equipment 14,300; Fees Earned 53,000; Miscellaneous Expense
16,800; Rent Expense 4,000; Retained Earnings 7,000; Wages
Expense 17,850;
1.

a. $10,800

2.

b. $14,350


3.

c. $14,450

4.

d. $27,500

A low-cost emphasis strives to provide:
1.

a. no-frills, standardized products and services.

2.

b. products and services that provide unique market needs.

3.

c. products and services that provide prestige and image for customers.

4.

d. products and services that compete on features other than price.

Costs incurred in operating a business are also known as:
1.

a. revenues.

2.

b. expenses.

3.

c. liabilities.

4.

d. dividends.

Motel 6, a company that helps customers find budget motels
across the nation, is an example of a business using which of the
following?
1.

a. Low-cost emphasis

2.

b. Outreach emphasis

3.

c. Customer emphasis

4.

d. Premium-price emphasis

60 Free Test Bank for Survey of Accounting 7th
Edition by Warren Multiple Choice Questions - Page 2
_____ is an example of internal stakeholders.

1.

a. Managers

2.

b. Creditors


3.

c. Stockholders

4.

d. Suppliers

Which of the following is considered an asset until consumed?
1.

a. Accounts payable

2.

b. Prepaid expense

3.

c. Accounts receivable

4.

d. Stockholders' equity

Which of the following is an intangible asset?
1.

a. Patent

2.

b. Cash

3.

c. Land

4.

d. Equipment

Which of the following is true of rate of return on assets?
1.

a. It is a measure of a company’s profitability.

2.

b. It is used to evaluate a company’s ability to pay off its short-term debts.

3.

c. It is used to determine the financial leverage of a company.

4.

d. It is a measure of the optimum capital structure.

Which of the following is true about the cost principle?
1.

a.It limits the economic data recorded in an accounting system to data
related to the activities of that company.

2.

b. It initially records assets in the accounting records at their purchase
price.

3.

c. It assumes that a company will continue in business indefinitely.

4.

d.It reports the revenues earned by a company for a period with the
expenses incurred in generating the revenues.


The role of accounting in business is best defined as:

1.

a.an information system that provides reports to stakeholders about the
economic activities and condition of a business.

2.

b. a method of forecasting the future profitability of a company.

3.

c. the policies, procedures, and strategies used in a business.

4.

d. transaction analysis.

Which of the following is the correct order for preparing financial
statements?
1.

a. Income statement, Statement of cash flows, Retained earnings
statement, Balance sheet

2.

b. Retained earnings statement, Income statement, Statement of cash
flows, Balance sheet

3.

c. Statement of cash flows, Retained earnings statement, Balance sheet,
Income statement

4.

d. Income statement, Retained earnings statement, Balance sheet,
Statement of cash flows

The resources a business owns are called:
1.

a. assets.

2.

b. liabilities.

3.

c. earnings.

4.

d. stockholders' equity.

When a business borrows money, it incurs a(n):
1.

a. tax.

2.

b. liability.

3.

c. receivable.

4.

d. additional equity.


Which of the following would not be an example of a
merchandising business?
1.

a. The Walt Disney Company

2.

b. JCPenney

3.

c. Amazon.com

4.

d. Wal-Mart

Which of the following types of business is popular for its ease
and low cost of organizing?
1.

a. Not-for-profit

2.

b. Corporation

3.

c. Partnership

4.

d. Proprietorship

The "rules" of accounting are called:
1.

a. income tax regulations.

2.

b. SEC regulations.

3.

c. Internet rules.

4.

d. Generally Accepted Accounting Principles.

Use the following information to determine Total Stockholders’
Equity: Total Assets $ 45,000; Total Liabilities 18,000; Total
Stockholders’ Equity x; Total Retained Earnings 5,000
1.

a. $58,000

2.

b. $27,000

3.

c. $32,000

4.

d. $40,000

Which of the following is true about limited liability company?


1.

a. It is taxed as a separate legal entity.

2.

b. It combines attributes of a partnership and a corporation.

3.

c. Its financial resources are limited to the individual owner’s resources.

4.

d. Its formation process is complex.

Which of the following are business stakeholders?
1.

a. Stockholders

2.

b. Suppliers

3.

c. Customers

4.

d. All of these

Under a _____, a business designs products that possess unique
attributes or characteristics for which customers are willing to pay
more.
1.

a. premium-price emphasis

2.

b. outreach emphasis

3.

c. low-cost emphasis

4.

d. customer emphasis

Which of the following is an appropriate representation of the
accounting equation?
1.

a. Assets + Liabilities = Stockholders’ equity

2.

b. Assets = Liabilities + Stockholders’ equity

3.

c. Assets = Liabilities

4.

d. Assets = Liabilities + Retained earnings

When a product is sold, the cost of the product sold is often
called:
1.

a. cost of goods sold.


2.

b. selling cost.

3.

c. period cost.

4.

d. retained cost.

The debt created by a business when it makes a purchase on
account is referred to as an:

1.

a. account payable.

2.

b. account receivable.

3.

c. asset.

4.

d. expense payable.

The purchase of factory equipment would be an example of which
type of business activity?
1.

a. Financing

2.

b. Investing

3.

c. Operating

4.

d. All of these

The return on assets is calculated by _____.
1.

a. dividing interest expense by average total asset and verage current
assets

2.

b. dividing net income before taxes and interest expense by average total
asset

3.

c. dividing average total asset and interest expense by net income taxes

4.

d. dividing net income before taxes and interest expense by average
current assets

Which of the items below is not a business organization form?
1.

a. Venture entrepreneurship

2.

b. Proprietorship


3.

c. Partnership

4.

d. Corporation

Which of the following is not an example of a capital market
stakeholder?
1.

a. Banks

2.

b. Owners

3.

c. Suppliers

4.

d. Stockholders

What is the primary objective of most businesses?
1.

a. To maximize profits

2.

b. To pay dividends to stockholders

3.

c. To provide a benefit to society

4.

d. To manufacture a quality product

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 an year, is called a(n):
1.

a. prior period statement.

2.

b. statement of retained earnings.

3.

c. income statement.

4.

d. balance sheet.

Shares of ownership are evidenced by issuing:
1.

a. shares payable.

2.

b. commercial paper.

3.

c. shares of stock.

4.

d. notes payable.


Which of the following businesses use a premium-price
emphasis?
1.

a. Value City Furniture selling furniture at affordable prices

2.

b. Tommy Hilfiger selling products that have a unique image

3.

c. Wal-Mart reselling standardized products

4.

d. Southwest Airlines providing standardized services

Who has the first preference to assets in case a business fails?
1.

a.Stockholders

2.

b. Long-term creditors

3.

c. Customers

4.

d. Employees

Which of the following is not a characteristic of a corporation?

1.

a. Corporations are organized as a separate legal taxable entity.

2.

b. Ownership is divided into shares of stock.

3.

4.

c. Corporations experience an ease in obtaining large amounts of
resources by issuing stock.
d. A corporation can elect to be taxed as a partnership.

The portion of a corporation's net income retained in the business
is called:
1.

a. interest earnings.

2.

b. dividends.

3.

c. tax expense.

4.

d. retained earnings.