57 free test bank for survey of accounting 5th edition

57 Free Test Bank for Survey of Accounting 5th Edition
by Warren Multiple Choice Questions
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.

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

a.Ford Motor Company

2.

b.Safeway

3.

c.Barnes & Noble

4.

d.Starbucks

Which statement is normally prepared first?
1.

a.Income statement

2.

b.Balance sheet

3.

c.Statement of cash flows

4.

d.Retained earnings statement

During 2010, Smith Corporation had an increase in total assets of
$70,000 and an increase in total liabilities of $90,000. Assuming
that capital stock increased by $5,000 and no dividends were paid,
calculate Smith’s net income or net loss for 2010.
1.

a.Net loss of $15,000

2.

b.Net loss of $20,000


3.

c.Net loss of $25,000

4.

d.Net income of $15,000

When a product is sold, this cost is often called
1.

a.cost of goods sold.

2.

b.revenue.

3.

c.products.

4.

d.retained earnings.

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

Which of the following is NOT a characteristic of a cdorporation?
1.

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

2.

b.Ownership is divided into shares of stock.

3.

c.Corporations experience an ease in obtaining large amounts of resources
by issuing stock.

4.

d.A corporation’s resources are limited to its individual owners’ resources.

5.

e.Corporations make up 20% of all businesses.

Reporting the financial condition of a business at a point in time and
the changes in the financial condition of a business over a period of
time are the two major objectives of
1.

a.tax accounting.

2.

b.union contracts.


3.

c.managerial accounting.

4.

d.financial accounting.

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.

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

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

Under a premium-price emphasis, a business designs products that
possess __________ for which customers are willing to pay a
premium price.
1.

a.unique attributes

2.

b.high costs

3.

c.competitive efficiencies


4.

d.longer warranties

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

a.revenues.

2.

b.expenses.

3.

c.liabilities.

4.

d.dividends.

More that 70% of businesses are organized as what type of
business?
1.

a.Not-for-profit

2.

b.Corporation

3.

c.Partnership

4.

d.Sole proprietorship

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.

Recording revenue when a sale is made most directly relates to
which concept?
1.

a.Going concern concept

2.

b.Periodicity concept

3.

c.Matching concept

4.

d.Adequate disclosure concept


Which of the following is TRUE in regards to a limited liability
company?

1.

a.It is organized as a corporation.

2.

b.It can elect to be taxed as a partnership.

3.

c.It provides tax and liability advantages to the owners.

4.

d.All are correct.

Heedy Company had the following account balances in 2010 and
2011, respectively. Assuming dividends of $20,000 were paid in
2011, how much was net income? 20112010 Capital Stock$
42,000$ 40,000 Retained Earningsx 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

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

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

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.

Use the following information to determine Total Stockholders’
Equity: Total Assets$ 50,000 Total Liabilities$ 15,000 Total
Stockholders’ Equityx Total Retained Earnings$ 13,000
1.

a.$52,000

2.

b.$50,000

3.

c.$35,000

4.

d.$22,000

Gilbert, Inc. had the following account balances at September 30,
2010. What is Gilbert’s net income for the month of September?
Accounts Payable$ 5,000 Capital Stock10,000 Cash14,300
Equipment15,400 Fees Earned54,400 Miscellaneous
Expense18,200 Rent Expense4,150 Retained Earnings6,550
Wages Expense13,900
1.

a.$32,450

2.

b.$27,450

3.

c.$6,550

4.

d.$18,150

The following are examples of internal stakeholders EXCEPT:
1.

a.managers.


2.

b.creditors.

3.

c.employees.

4.

d.All of these are internal stakeholders.

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

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.

Rights to payments from customers are
1.

a.liabilities.

2.

b.prepaid expenses.

3.

c.accounts receivable.

4.

d.accounts payable.

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

a.tax.

2.

b.liability.

3.

c.receivable.

4.

d.addtional equity.


A summary of changes in the earnings retained in the corporation
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.

Financing activities involve obtaining __________ to operate a
business.

1.

a.products

2.

b.customers

3.

c.business incentives

4.

d.funds

Which principle determines the amount initially entered into the
records for purchases?
1.

a.Cost principle

2.

b.Going concern concept

3.

c.Business entity concept

4.

d.Objectivity concept

Shares of ownership are evidenced by issuing
1.

a.bonds payable.

2.

b.commercial paper.

3.

c.shares of stock.

4.

d.notes payable.


If there was no beginning retained earnings, net income of $20,000,
and ending retained earnings of $6,000, how much were
dividends?
1.

a.$10,000

2.

b.$4,000

3.

c.$6,000

4.

d.$14,000

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.

Given the following list of accounts, calculate Total Assets:

Accounts Receivable$ 5,000 Capital Stock20,000 Cash19,300
Equipment15,400 Fees Earned44,400 Miscellaneous
Expense18,200 Rent Expense4,150 Retained Earnings6,550
Wages Expense13,900
1.

a.$84,100

2.

b.$59,700

3.

c.$46,250

4.

d.$39,700

Capital market stakeholders have an interest in the company
because
1.
2.

a.they provide incentives for the company to market their products.
b.they are part of the Marketing Department that is responsible for promoting
the products or services to increase the business profits.

3.

4.

c.they help market their products to customers or find vendors to supply
needed inputs.
d.they provide major financing for the business.

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.

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

a.income statement.

2.

b.balance sheet.

3.

c.statement of cash flows.

4.

d.retained earnings.

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

a.Venture entrepreneurship

2.

b.Proprietorship

3.

c.Partnership

4.

d.Corporation

Motel 6 is an example of a business using which of the following?
1.

a.Low-cost emphasis

2.

b.Combination emphasis

3.

c.Differentiation strategy

4.

d.Premium-price emphasis


The resources a business owns are called
1.

a.assets.

2.

b.liabilities.

3.

c.earnings.

4.

d.stockholders' equity.

Which of the following are business stakeholders?
1.

a.Stockholders

2.

b.Suppliers

3.

c.Customers

4.

d.All of these

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.

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

a.interest.

2.

b.cash.

3.

c.accounts payable.

4.

d.investments.

Which of the following is an example of an intangible asset?
1.

a.Patent

2.

b.Cash


3.

c.Land

4.

d.Equipment

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 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)
1.

a.prior period statement.

2.

b.statement of retained earnings.

3.

c.income statement.

4.

d.balance sheet.

An entity that is organized according to state or federal statutes and
in which ownership is divided into shares of stock is a
1.

a.proprietorship.

2.

b.corporation.

3.

c.partnership.

4.

d.governmental unit.

Managers are evaluated primarily on the business's
1.

a.tax collections.

2.

b.growth.

3.

c.economic performance.


4.

d.all of these.

Due to various fraudulent business practices and accounting
coverups in the early 2000s, Congress enacted the Sarbanes-Oxley

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.None are correct.

Browning, Inc. had revenues of $234,000, expenses of $175,000,
and dividends of $30,000 during 2010. Which of the following
statements is correct?
1.

a.Net income for 2010 totaled $29,000.

2.

b.Net income for 2010 totaled $59,000.

3.

c.Total retained earnings increased by $59,000 during 2010.

4.

d.Total retained earnings decreased by $30,000 during 2010.

Debts owed by a business are referred to as
1.

a.accounts receivable.

2.

b.equities.

3.

c.stockholders’ equity.

4.

d.liabilities.

Who has 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 businesses use a premium-price emphasis?
1.

a.Value City Furniture

2.

b.Abercrombie & Fitch

3.

c.Wal-Mart Supercenters

4.

d.Southwest Airlines

A summary of revenue and expenses 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.

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

a.Revenue

2.

b.Liabilities

3.

c.Products

4.

d.Stockholders’ Equity

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