148 test bank for financial accounting 8th edition

148 Test Bank for Financial Accounting 8th Edition
by Weygandt Multiple Choice Questions - Page 1
All of the following are steps in analyzing ethics cases in financial
reporting except
1.

a.identify and analyze the principle elements in the situation.

2.

b.contact law enforcement regarding any violations of corporate ethics codes

3.

c.identify the alternatives and weigh the impact of each alternative on various
stakeholders.

4.

d.recognize an ethical situation and the ethical issues involved.

A problem with the monetary unit assumption is that
1.

a.the dollar has not been stable over time.

2.

b.the dollar has been stable over time.

3.

c.the dollar is a common medium of exchange.

4.

d.it is impossible to account for international transactions.

The accounting process is correctly sequenced as
1.

a.identification, communication, recording.

2.

b.recording, communication, identification.

3.

c.identification, recording, communication.

4.

d.communication, recording, identification.

A business organized as a corporation
1.

a.is not a separate legal entity in most states.

2.

b.requires that stockholders be personally liable for the debts of the business.

3.

c.is owned by its stockholders.

4.

d.terminates when one of its original stockholders dies.


Andre Dickinson, owner of Andre's Fine Wines, also owns a
personal residence that costs $475,000. The market value of his
residence is $625,000. During preparation of the financial
statements for Andre's Fine Wines, the accounting concept most
relevant to the presentation of Andre's home is
1.

a.the economic entity assumption.

2.

b.the fair value principle.

3.

c.the monetary unit assumption.

4.

d.convergence.

The process of recording transactions has become more efficient
because
1.

a.fewer events can be quantified in financial terms.

2.

b.computers are used in processing business events.

3.

c.more people have been hired to record business transactions.

4.

d.business events are recorded only at the end of the year.

Owners enjoy limited liability in a
1.

a.proprietorship.

2.

b.partnership.

3.

c.corporation.

4.

d.sole proprietorship.

Ethics are the standards of conduct by which one's actions are
judged as
1.

a.right or wrong.

2.

b.honest or dishonest.

3.

c.fair or unfair.

4.

d.all of these.


Ted Leo is the proprietor (owner) of Ted's, a retailer of golf apparel.
When recording the financial transactions of Ted's, Ted does not
record an entry for a car he purchased for personal use. Ted took

out a personal loan to pay for the car. What accounting concept
guides Ted's behavior in this situation?
1.

a.Pay back concept

2.

b.Economic entity assumption

3.

c.Cash basis concept

4.

d.Monetary unit assumption

The final step in solving an ethical dilemma is to
1.

a.identify and analyze the principal elements in the situation.

2.

b.recognize an ethical situation.

3.

4.

c.identify the alternatives and weigh the impact of each alternative on
stakeholders.
d.recognize the ethical issues involved.

Which of the following is not an advantage of the corporate form of
business organization?
1.

a.Limited liability of stockholders

2.

b.Transferability of ownership

3.

c.Unlimited personal liability for stockholders

4.

d.Unlimited life

The Duce Company has five plants nationwide that cost a total of
$100 million. The current fair value of the plants is $500 million. The
plants will be recorded and reported as assets at
1.

a.$100 million.

2.

b.$600 million.

3.

c.$400 million.


4.

d.$500 million.

The SEC and FASB are two organizations that are primarily
responsible for establishing generally accepted accounting
principles. It is true that
1.

a.they are both governmental agencies.

2.

b.the SEC is a private organization of accountants.

3.

c.the SEC often mandates guidelines when no accounting principles exist.

4.

d.the SEC and FASB rarely cooperate in developing accounting standards.

The fair value principle is applied for
1.

a.all assets.

2.

b.current assets.

3.

c.buildings.

4.

d.investment securities.

The body of theory underlying accounting is not based on
1.

a.physical laws of nature.

2.

b.concepts.

3.

c.principles.

4.

d.definitions.

Bookkeeping differs from accounting in that bookkeeping primarily
involves which part of the accounting process?
1.

a.Identification.

2.

b.Communication.

3.

c.Recording.

4.

d.Analysis.

The economic entity assumption requires that the activities


1.

a.of different entities can be combined if all the entities are corporations.

2.

b.must be reported to the Securities and Exchange Commission.

3.

4.

c.of a sole proprietorship cannot be distinguished from the personal economic
events of its owners.
d.of an entity be kept separate from the activities of its owner.

The use of computers in recording business events
1.

a.has made the recording process more efficient.

2.

b.does not use the same principles as manual accounting systems.

3.

c.has greatly impacted the identification stage of the accounting process.

4.

d.is economical only for large businesses.

The cost of an asset and its fair value are
1.

a.never the same.

2.

b.the same when the asset is sold.

3.

c.irrelevant when the asset is used by the business in its operations.

4.

d.the same on the date of acquisition.

Generally accepted accounting principles are
1.

a.income tax regulations of the Internal Revenue Service.

2.

b.standards that indicate how to report economic events.

3.

c.theories that are based on physical laws of the universe.

4.

d.principles that have been proven correct by academic researchers.

Accountants refer to an economic event as a
1.

a.purchase.

2.

b.sale.

3.

c.transaction.


4.

d.change in ownership.

Martin Corporation purchased land in 2007 for $290,000. In 2013, it
purchased a nearly identical parcel of land for $460,000. In its 2013
balance sheet, Martin valued these two parcels of land at a
combined value of $920,000. By reporting the land in this manner,
Martin Corp. has violated the
1.

a.cost principle

2.

b.convergence

3.

c.economic entity assumption

4.

d.monetary unit assumption

The private sector organization involved in developing accounting
principles is the
1.

a.Feasible Accounting Standards Body.

2.

b.Financial Accounting Studies Board.

3.

c.Financial Accounting Standards Board.

4.

d.Financial Auditors' Standards Body.

A small neighborhood barber shop that is operated by its owner
would likely be organized as a
1.

a.joint venture.

2.

b.partnership.

3.

c.corporation.

4.

d.proprietorship.

Financial accounting provides economic and financial information
for all of the following except
1.

a.creditors.

2.

b.investors.

3.

c.managers.

4.

d.other external users.

Communication of economic events is the part of the accounting
process that involves
1.

a.identifying economic events.

2.

b.quantifying transactions into dollars and cents.

3.

c.preparing accounting reports.

4.

d.recording and classifying information.

The cost principle requires that when assets are acquired, they be
recorded at
1.

a.appraisal value.

2.

b.cost.

3.

c.market price.

4.

d.book value.

The partnership form of business organization
1.

a.is a separate legal entity.

2.

b.is a common form of organization for service-type businesses.

3.

c.enjoys an unlimited life.

4.

d.has limited liability.

Which of the following is an external user of accounting
information?
1.

a.Labor unions.

2.

b.Finance directors.

3.

c.Company officers.

4.

d.Managers.


Which of the following would not be considered an internal user of
accounting data for the GHI Company?
1.

a.President of the company.

2.

b.Production manager.

3.

c.Merchandise inventory clerk.

4.

d.President of the employees' labor union.

The assumption that the unit of measure remains sufficiently
constant over time is part of the
1.

a.economic entity assumption.

2.

b.cost principle.

3.

c.historical cost principle.

4.

d.monetary unit assumption.

Which of the following would not be considered internal users of
accounting data for a company?
1.

a.The president of a company.

2.

b.The controller of a company.

3.

c.Creditors of a company.

4.

d.Salesmen of the company.

The first step in solving an ethical dilemma is to
1.

a.identify and analyze the principal elements in the situation.

2.

b.identify the alternatives.

3.

c.recognize an ethical situation and the ethical issues involved.

4.

d.weigh the impact of each alternative on various stakeholders.

Accounting consists of three basic activities which are related to
economic events of an organization. These include


1.

a.identifying, recording, and communicating

2.

b.identifying, calculating, and responding

3.

c.classifying, numbering, and reporting

4.

d.issuing, reporting, and classifying

Financial information that is capable of making a difference in a
decision is
1.

a.faithfully representative.

2.

b.relevant.

3.

c.convergent.

4.

d.generally accepted.

John and Sam met at law school and decide to start a small law
practice after graduation. They agree to split revenues and
expenses evenly. The most common form of business organization
for a business such as this would be a
1.

a.joint venture.

2.

b.partnership.

3.

c.corporation.

4.

d.proprietorship.

A basic assumption of accounting that requires activities of an entity

be kept separate from the activities of its owner is referred to as the
1.

a.stand alone concept.

2.

b.monetary unit assumption.

3.

c.corporate form of ownership.

4.

d.economic entity assumption.

The origins of accounting are generally attributed to the work of


1.

a.Christopher Columbus.

2.

b.Abner Doubleday.

3.

c.Luca Pacioli.

4.

d.Leonardo da Vinci.

Which of the following is true regarding the corporate form of
business organization?
1.

a.Corporations are the most prevalent form of business organization.

2.

b.Corporate businesses are generally smaller in size than partnerships and
proprietor-ships.

3.

c.The revenues of corporations are greater than the combined revenues of
partnerships and proprietorships.

4.

d.Corporations are separate legal entities organized exclusively under federal
law.

A basic assumption of accounting assumes that the dollar is
1.

a.unrelated to business transactions.

2.

b.a poor measure of economic activities.

3.

c.the common unit of measure for all business transactions.

4.

d.useless in measuring an economic event.

The accounting process involves all of the following except
1.

a.identifying economic transactions that are relevant to the business.

2.

b.communicating financial information to users by preparing financial reports.

3.

c.recording nonquantifiable economic events.

4.

d.analyzing and interpreting financial reports.

All of the following statements are correct except
1.

a.Good decision-making depends on good information.


2.

b.A vital element in communicating economic events is the accountant's ability
to analyze and interpret reported information.

3.

c.The origins of accounting are generally attributed to Socrates, a classical
Greek philosopher, who promoted accounting as a social contract.

4.

d.The information that a user of financial information needs depends upon the
kinds of decisions the user makes.

The proprietorship form of business organization
1.

a.must have at least three owners in most states.

2.

b.represents the largest number of businesses in the United States.

3.

c.combines the records of the business with the personal records of the
owner.

4.

d.is characterized by a legal distinction between the business as an economic
unit and the owner.

GAAP stands for
1.

a.Generally Accepted Auditing Procedures.

2.

b.Generally Accepted Accounting Principles.

3.

c.Generally Accepted Auditing Principles.

4.

d.Generally Accepted Accounting Procedures.

In order to increase comparability, in recent years, the FASB and
IASB have made efforts to reduce the differences between

U.S.GAAP and IFRS through a process known as
1.

a.convergence

2.

b.monetary unit assumption

3.

c.the cost principle

4.

d.the fair value principle

Which of the following events cannot be quantified into dollars and
cents and recorded as an accounting transaction?


1.

a.The appointment of a new CPA firm to perform an audit.

2.

b.The purchase of a new computer.

3.

c.The sale of store equipment.

4.

d.Payment of income taxes.

Which of the following techniques are not used by accountants to
interpret and report financial information?
1.

a.Graphs.

2.

b.Special memos for each class of external users.

3.

c.Charts.

4.

d.Ratios.

Which one of the following is not an external user of accounting
information?
1.

a.Regulatory agencies.

2.

b.Customers.

3.

c.Investors.

4.

d.All of these are external users.

Which of the following would not be considered an external user of
accounting data for the GHI Company?
1.

a.Internal Revenue Service Agent.

2.

b.Management.

3.

c.Creditors.

4.

d.Customers.

148 Free Test Bank for Financial Accounting 8th Edition
by Weygandt Multiple Choice Questions - Page 2
Stockholders' equity is decreased by


1.

a.assets.

2.

b.revenues.

3.

c.expenses.

4.

d.liabilities.

Liabilities of a company would not include
1.

a.notes payable.

2.

b.accounts payable.

3.

c.salaries and wages payable.

4.

d.cash.

If total liabilities decreased by $15,000 and stockholders' equity
decreased by $10,000 during a period of time, then total assets
must change by what amount and direction during that same
period?
1.

a.$25,000 decrease

2.

b.$5,000 decrease

3.

c.$5,000 increase

4.

d.$25,000 increase

Stockholders' equity is increased by

1.

a.dividends.

2.

b.revenues.

3.

c.expenses.

4.

d.liabilities.

As of June 30, 2013, Actual Tigers Company has assets of
$100,000 and stockholders' equity of $30,000. What are the
liabilities for Actual Tigers Company as of June 30, 2013?


1.

a.$30,000

2.

b.$70,000

3.

c.$100,000

4.

d.$130,000

Which of the following will not cause a change in the stockholders'
equity of a business?
1.

a.An increase in prepaid expenses.

2.

b.An increase in retained earnings.

3.

c.The sale of common stock.

4.

d.The declaration and payment of dividends.

If total liabilities decreased by $25,000 and stockholders' equity
increased by $15,000 during a period of time, then total assets must
change by what amount and direction during that same period?
1.

a.$40,000 decrease

2.

b.$10,000 decrease

3.

c.$10,000 increase

4.

d.$40,000 increase

If total assets equal $345,000 and total stockholders' equity equal
$120,000, then total liabilities must equal
1.

a.$465,000.

2.

b.$225,000.

3.

c.$120,000.

4.

d.There is not enough information given to determine this.

If total liabilities increased by $15,000 and stockholders' equity
increased by $10,000 during a period of time, then total assets must
change by what amount and direction during that same period?


1.

a.$25,000 decrease

2.

b.$5,000 decrease

3.

c.$5,000 increase

4.

d.$25,000 increase

When assets are distributed to the owners of a corporation, these
distributions are termed
1.

a.depletions.

2.

b.consumptions.

3.

c.dividends.

4.

d.a credit line.

Revenues would not result from
1.

a.sale of merchandise.

2.

b.issuance of common stock.

3.

c.performance of services.

4.

d.rental of property.

A net loss will result during a time period when
1.

a.liabilities exceed assets.

2.

b.dividends exceed investments.

3.

c.expenses exceed revenues.

4.

d.revenues exceed expenses.

A dividend is
1.

a.a distribution of the company's earnings to its stockholders.

2.

b.equal to liabilities minus stockholders' equity.

3.

c.equal to assets minus stockholders' equity.


4.

d.equal to revenues less expenses

If the transaction causes an asset account to decrease, which of the
following related effects may occur?
1.

a.An increase of equal amount in the common stock account.

2.

b.An increase in a liability account.

3.

c.An increase of equal amount in another asset account.

4.

d.An increase in the combined total of liabilities and stockholders' equity.

The basic accounting equation may be expressed as
1.

a.Assets = Equities.

2.

b.Assets – Liabilities = Stockholders' Equity.

3.

c.Assets = Liabilities + Stockholders' Equity.

4.

d.all of these.

Stockholders' equity can be described as
1.

a.creditorship claim on total assets.

2.

b.ownership claim on total assets.

3.

c.benefactor's claim on total assets.

4.

d.debtor claim on total assets.

The accounting equation for Quattro Enterprises is as follows:
$120,000 (Assets) =$60,000 (Liabilities) +$60,000 (Stockholders'
Equity). If Quattro purchases office equipment on account for
$15,000, the accounting equation will change to
1.

a.$120,000 (Assets) = $60,000 ((Liabilties) +$60,000(Stockholders' Equity)

2.

b.$135,000 ((Assets) = $60,000 ((Liabilties) +$75,000(Stockholders' Equity)

3.

c.$135,000 ((Assets) = $67,500 ((Liabilties) +$67,500 (Stockholders' Equity)

4.

d.$135,000 ((Assets) = $75,000 (Liabilties) +$60,000 (Stockholders' Equity)


Liabilities of a company are owed to
1.

a.debtors.

2.

b.benefactors.

3.

c.creditors.

4.

d.underwriters.

The common characteristic possessed by all assets is
1.

a.long life.

2.

b.great monetary value.

3.

c.tangible nature.

4.

d.future economic benefit.

Sources of increases to stockholder's equity are
1.

a.additional investments by owners.

2.

b.purchases of merchandise.

3.

c.dividends.

4.

d.expenses.

Stockholders' equity is decreased by all of the following except
1.

a.sales of stock.

2.

b.net losses.

3.

c.expenses.

4.

d.dividends.

If total liabilities increased by $17,000 during a period of time and
stockholders' equity decreased by $6,000 during the same period,
then the amount and direction (increase or decrease) of the period’s
change in total assets is a(n)
1.

a.$23,000 decrease.


2.

b.$11,000 decrease.

3.

c.$11,000 increase.

4.

d.$23,000 increase.

Owner's equity is best depicted by the following:
1.

a.Assets = Liabilities.

2.

b.Liabilities + Assets.

3.

c.Residual equity + Assets.

4.

d.Assets – Liabilities.

The basic accounting equation cannot be restated as
1.

a.Assets – Liabilities = Stockholders' Equity.

2.

b.Assets – Stockholders' Equity = Liabilities.

3.

c.Stockholders' Equity + Liabilities = Assets.

4.

d.Assets + Liabilities = Stockholders' Equity.

Liabilities
1.

a.are future economic benefits.

2.

b.are existing debts and obligations.

3.

c.possess service potential.

4.

d.are things of value used by the business in its operation.

Stockholders' equity is often referred to as
1.

a.residual equity.

2.

b.leftovers.

3.

c.spoils.

4.

d.second equity.

The amount of stockholders' equity in a business is not affected by


1.

a.The percentage of total assets held in cash.

2.

b.Assets consumed in the process of earning revenues.

3.

c.The profitability of the business.

4.

d.The amount of dividends declared and paid to stockholders.

If total liabilities decreased by $15,000 and stockholders' equity
increased by $10,000 during a period of time, then total assets must
change by what amount and direction during that same period?
1.

a.$25,000 decrease

2.

b.$5,000 decrease

3.

c.$5,000 increase

4.

d.$25,000 increase

148 Free Test Bank for Financial Accounting 8th Edition
by Weygandt Multiple Choice Questions - Page 3
At October 1, Arcade Fire Enterprises reported stockholders' equity
of $35,000. During October, common stock of $2,000 was issued
and the company earned net income of $7,000. If stockholders'
equity at October 31 totals $40,000, what amount of dividends were
paid during the month?
1.

a.$0

2.

b.$2,000

3.

c.$4,000

4.

d.$5,000

All of the financial statements are for a period of time except the
1.

a.income statement.

2.

b.retained earnings statement.

3.

c.balance sheet.


4.

d.statement of cash flows.

Stahl Consulting started the year with total assets of $20,000 and
total liabilities of $5,000. During the year, the business recorded
$16,000 in catering revenues and $10,000 in expenses. Stahl
issued stock of $3,000 and paid dividends of $5,000 during the
year. The net income reported by Stahl Consulting for the year
was:
1.

a.$1,000.

2.

b.$4,000.

3.

c.$6,000.

4.

d.$9,000.

The concern about international companies adopting SOX-type
standards centers on
1.

a. cost-benefit analysis.

2.

b. ethics issues.

3.

c. the governing authorities.

4.

d. comparability.

Auditing is
1.

a.the examination of financial statements by a CPA in order to express an
opinion on their fairness.

2.

b.a part of accounting that involves only recording of economic events.

3.

c.an area of accounting that involves such activities as cost accounting,
budgeting, and accounting information systems.

4.

d.conducted by the Securities and Exchange Commission to ensure that
registered financial statements are presented fairly.

Teamboo Company’s stockholders' equity at the beginning of
August 2013 was $300,000. During the month, the company earned


net income of $70,000 and paid dividends of $30,000. At the end of
August 2013, what is the amount of stockholders' equity?
1.

a.$270,000

2.

b.$300,000

3.

c.$330,000

4.

d.$340,000

The balance sheet is frequently referred to as
1.

a.an operating statement.

2.

b.the statement of financial position.

3.

c.the statement of cash flows.

4.

d.the statement of retained earnings.

Which of the following is not a reason one set of international
accounting standards are needed?
1.

a. multinational corporations.

2.

b. mergers and acquisitions.

3.

c. information technology.

4.

d. all of the above are reasons one set of international accounting standards
are needed.

International standards are developed by the
1.

a. IFRS.

2.

b. GAAP.

3.

c. IASB.

4.

d. FASB.


During the year 2013, Dilego Company earned revenues of
$45,000, had expenses of $28,000, purchased assets with a cost of

$5,000 and paid dividends of $3,000. Net income for the year is
1.

a.$9,000.

2.

b.$12,000.

3.

c.$14,000.

4.

d.$17,000.

The primary purpose of the statement of cash flows is to report
1.

a.a company's investing transactions.

2.

b.a company's financing transactions.

3.

c.information about cash receipts and cash payments of a company.

4.

d.the net increase or decrease in cash.

Revenues are
1.

a.the cost of assets consumed during the period.

2.

b.gross increases in stockholders' equity resulting from business activities.

3.

c.the cost of services used during the period.

4.

d.actual or expected cash outflows.

Keeping a systematic, chronological diary of events that are
measured in dollars and cents is called
1.

a.communicating.

2.

b.identifying.

3.

c.processing.

4.

d.recording.

Which of the following is not part of the accounting process?
1.

a.Recording


2.

b.Identifying

3.

c.Financial decision making

4.

d.Communicating

The ending retained earnings amount is shown on
1.

a.the balance sheet only.

2.

b.the retained earnings statement only.

3.

c.both the income statement and the retained earnings statement.

4.

d.both the balance sheet and the retained earnings statement.

IFRS, compared to GAAP, tends to be more
1.

a. detailed.

2.

b. rules-based.

3.

c. principles-based.

4.

d. full of disclosure requirements.

A private accountant can perform many activities in a business
organization but would not work in
1.

a.budgeting.

2.

b.accounting information systems.

3.

c.external auditing.

4.

d.tax accounting.

If total liabilities increased by $8,000, then
1.

a.assets must have decreased by $8,000.

2.

b.stockholders' equity must have increased by $8,000.

3.

c.assets must have increased by $8,000, or stockholders' equity must have
decreased by $8,000.


4.

d.assets and stockholders' equity each increased by $4,000.

Fat Possum’s Service Shop started the year with total assets of
$110,000 and total liabilities of $80,000. During the year, the
business recorded $210,000 in revenues, $140,000 in expenses,
and paid dividends of $20,000. The net income reported by Fat
Possum’s Service Shop for the year was
1.

a.$50,000.

2.

b.$70,000.

3.

c.$80,000.

4.

d.$90,000.

Misra Company compiled the following financial information as of

December 31, 2013: Revenues $170,000; Retained earnings
(1/1/13)30,000; Equipment 40,000; Expenses 125,000; Cash
45,000; Dividends 10,000; Supplies 5,000; Accounts payable
20,000; Accounts receivable 35,000; Common stock 40,000.
Misra’s assets on December 31, 2013 are
1.

a.$90,000.

2.

b.$125,000.

3.

c.$180,000.

4.

d$245,000.

Centro-matic Company began the year with stockholders' equity of
$15,000. During the year, Centro-matic issued additional shares of
stock in exchange for cash of $21,000, recorded expenses of
$60,000, and paid dividends of $4,000. If Centro-matic’s ending
stockholders' equity was $56,000, what was the company’s revenue
for the year?
1.

a.$80,000.

2.

b.$84,000.

3.

c.$101,000.


4.

d.$105,000.

Retained earnings at the end of the period is equal to
1.

a.retained earnings at the beginning of the period plus net income minus
liabilities.

2.

b.retained earnings at the beginning of the period plus net income minus
dividends.

3.

c.net income.

4.

d.assets plus liabilities.

The organization(s) primarily responsible for establishing generally
accepted accounting principles is(are) the
1.

a.no (FASB); no (SEC)

2.

b.yes (FASB); no (SEC)

3.

c.no (FASB); yes (SEC)

4.

d.yes (FASB); yes (SEC)

The United States and the international standard-setting
environment are primarily driven by meeting the needs of
1.

a. investors and creditors.

2.

b. tax authorities.

3.

c. central government planners.

4.

d. academic researchers.

The first part of the accounting process is
1.

a.communicating.

2.

b.identifying.

3.

c.processing.

4.

d.recording.