177 test bank for accounting principles 11th edition

177 Test Bank for Accounting Principles 11th Edition
True False Questions - - Multiple Choice Questions
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.

b. $600 million.

2.

c. $400 million.

3.

a. $100 million.

4.

d. $500 million.

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

d. Managers.

2.

b. Finance directors.

3.

c. Company officers.

4.

a. Labor unions.

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

b. cost.

2.

a. appraisal value.

3.

c. market price.

4.

d. book value.


The use of computers in recording business events
1.

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

2.

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

3.

a. has made the recording process more efficient.

4.

d. is economical only for large businesses.

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

c. managers.

2.

b. investors.

3.

a. creditors.

4.

d. other external users.

Accountants refer to an economic event as a
1.

d. change in ownership.

2.

a. purchase.

3.

c. transaction.

4.

b. sale.

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.

d. analyzing and interpreting financial reports.

4.

c. recording nonquantifiable economic events.

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.

d. Payment of income taxes.

3.

b. The purchase of a new computer.

4.

c. The sale of store equipment.

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

d. recording and classifying information.

2.

b. quantifying transactions into dollars and cents.

3.

c. preparing accounting reports.

4.

a. identifying economic events.

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

c. corporation.

2.

b. partnership.

3.

a. joint venture.

4.

d. proprietorship.

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.

d. Unlimited life

4.

c. Unlimited personal liability for stockholders

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

a. Regulatory agencies.

2.

d. All of these are external users.

3.

c. Investors.

4.

b. Customers.

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

a. fewer events can be quantified in financial terms.

2.

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

3.

b. computers are used in processing business events.

4.

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

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

a. Identification.

2.

d. Analysis.


3.

b. Communication.

4.

c. Recording.

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

d. generally accepted.

2.

b. relevant.

3.

c. convergent.

4.

a. faithfully representative.

The accounting process is correctly sequenced as
1.

d. communication, recording, identification.

2.

b. recording, communication, identification.

3.

c. identification, recording, communication.

4.

a. identification, communication, recording.

A business organized as a corporation
1.

d. terminates when one of its original stockholders dies.

2.

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

3.

c. is owned by its stockholders.

4.

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

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

d. tax accounting.


2.

a. budgeting.

3.

c. external auditing.

4.

b. accounting information systems.

The economic entity assumption requires that the activities
1.

c. of a sole proprietorship cannot be distinguished from the personal economic events
of its owners.

2.

d. of an entity be kept separate from the activities of its owner.

3.

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

4.

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

Which list below best describes the major services performed by public
accountants?
1.

b. Employee training, auditing, bookkeeping.

2.

d. Cost accounting, production scheduling, recruiting.

3.

a. Bookkeeping, mergers, budgets.

4.

c. Auditing, taxation, management consulting.

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

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

2.

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

3.

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

4.

b. identify the alternatives.


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

a. Graphs.

2.

d. Ratios.

3.

c. Charts.

4.

b. Special memos for each class of external users.

Generally accepted accounting principles are
1.

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

2.

a. income tax regulations of the Internal Revenue Service.

3.

b. standards that indicate how to report economic events.

4.

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

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

c. fair or unfair.

2.

d. all of these.

3.

b. honest or dishonest.

4.

a. right or wrong.

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

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

2.

a. they are both governmental agencies.


3.

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

4.

b. the SEC is a private organization of accountants.

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

d. Salesmen of the company.

2.

b. The controller of a company.

3.

c. Creditors of a company.

4.

a. The president of a company.

GAAP stands for
1.

b. Generally Accepted Accounting Principles.

2.

d. Generally Accepted Accounting Procedures.

3.

c. Generally Accepted Auditing Principles.

4.

a. Generally Accepted Auditing Procedures.

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

d. President of the employees' labor union.

2.

a. President of the company.

3.

b. Production manager.

4.

c. Merchandise inventory clerk.


The partnership form of business organization
1.

d. has limited liability.

2.

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

3.

c. enjoys an unlimited life.

4.

a. is a separate legal entity.

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

d. Customers.

2.

c. Creditors.

3.

a. Internal Revenue Service Agent.

4.

b. Management.

The fair value principle is applied for
1.

b. current assets.

2.

a. all assets.

3.

c. buildings.

4.

d. investment securities.

Preparing tax returns and engaging in tax planning is performed by
1.

b. private accountants only.

2.

c. both public and private accountants.

3.

d. IRS accountants only.


4.

a. public accountants only.

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

d. the same on the date of acquisition.

2.

b. the same when the asset is sold.

3.

a. never the same.

4.

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

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

c. Financial Accounting Standards Board.

2.

a. Feasible Accounting Standards Body.

3.

d. Financial Auditors' Standards Body.

4.

b. Financial Accounting Studies Board.

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

b. concepts.

2.

d. definitions.

3.

c. principles.

4.

a. physical laws of nature.

The origins of accounting are generally attributed to the work of
1.

d. Leonardo da Vinci.

2.

c. Luca Pacioli.

3.

a. Christopher Columbus.

4.

b. Abner Doubleday.

All of the following are services offered by public accountants except
1.

a. budgeting.

2.

b. auditing.

3.

d. consulting.

4.

c. tax planning.

The proprietorship form of business organization
1.

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

2.

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

3.

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

4.

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

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

b. recognize an ethical situation.

2.

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

3.

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

4.

d. recognize the ethical issues involved.

137 Sample Test Bank for Accounting Principles 11th
Edition by Weygand Multiple Choice Questions - Page 2


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

d. monetary unit assumption.

2.

b. cost principle.

3.

c. historical cost principle.

4.

a. economic entity assumption.

If total liabilities decreased by $15,000 and owner’s 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.

d. $25,000 increase

2.

a. $25,000 decrease

3.

b. $5,000 decrease

4.

c. $5,000 increase

If services are rendered for credit, then
1.

a. assets will decrease.

2.

d. liabilities will decrease.

3.

b. liabilities will increase.

4.

c. owner's equity will increase.

If an individual asset is increased, then
1.

c. there must be an equal decrease in another asset.

2.

b. there must be an equal decrease in owner's equity.


3.

d. any of these is possible.

4.

a. there must be an equal decrease in a specific liability.

If expenses are paid in cash, then
1.

c. owner's equity will increase.

2.

d. assets will decrease.

3.

b. liabilities will decrease.

4.

a. assets will increase.

Revenues are
1.

b. gross increases in owner's equity resulting from business activities.

2.

d. actual or expected cash outflows.

3.

c. the cost of services used during the period.

4.

a. the cost of assets consumed during the period.

If total liabilities decreased by $25,000 and owner’s 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.

c. $10,000 increase

2.

b. $10,000 decrease

3.

a. $40,000 decrease

4.

d. $40,000 increase


The basic accounting equation may be expressed as
1.

b. Assets – Liabilities = Owner's Equity.

2.

d. all of these.

3.

a. Assets = Equities.

4.

c. Assets = Liabilities + Owner's Equity.

The common characteristic possessed by all assets is

1.

d. future economic benefit.

2.

a. long life.

3.

c. tangible nature.

4.

b. great monetary value.

Owner's equity is decreased by
1.

b. revenues.

2.

c. expenses.

3.

d. liabilities.

4.

a. assets.

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

d. $135,000 = $75,000 + $60,000

2.

b. $135,000 = $60,000 + $75,000


3.

a. $120,000 = $60,000 + $60,000

4.

c. $135,000 = $67,500 + $67,500

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.

c. corporate form of ownership.

2.

d. economic entity assumption.

3.

b. monetary unit assumption.

4.

a. stand alone concept.

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

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

2.

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

3.

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

4.

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

Owner's equity is increased by
1.

d. liabilities.

2.

c. expenses.

3.

a. drawings.

4.

b. revenues.


Liabilities
1.

b. are existing debts and obligations.

2.

a. are future economic benefits.

3.

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

4.

c. possess service potential.

Revenues would not result from
1.

b. initial investment of cash by owner.

2.

d. rental of property.

3.

a. sale of merchandise.

4.

c. performance of services.

As of June 30, 2011, Actual Tigers Company has assets of $100,000 and
owner’s equity of $30,000. What are the liabilities for Actual Tigers Company
as of June 30, 2011?
1.

c. $100,000

2.

a. $30,000

3.

b. $70,000

4.

d. $130,000

If an owner makes a withdrawal of cash from a proprietorship, then
1.

d. there will be a new liability showing the owner owes money to the business.

2.

c. owner's equity will decrease.


3.

b. owner's equity will increase.

4.

a. there has been a violation of accounting principles.

Owner's equity is often referred to as

1.

b. leftovers.

2.

c. spoils.

3.

a. residual equity.

4.

d. second equity.

Liabilities of a company are owed to
1.

c. creditors.

2.

b. benefactors.

3.

d. underwriters.

4.

a. debtors.

When an owner withdraws cash or other assets from a business for personal
use, these withdrawals are termed
1.

c. drawings.

2.

a. depletions.

3.

b. consumptions.

4.

d. a credit line.

The basic accounting equation cannot be restated as
1.

c. Owner's Equity + Liabilities = Assets.


2.

b. Assets – Owner's Equity = Liabilities.

3.

d. Assets + Liabilities = Owner's Equity.

4.

a. Assets – Liabilities = Owner's Equity.

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.

c. Cash basis concept

2.

b. Economic entity assumption

3.

a. Pay back concept

4.

d. Monetary unit assumption

Owner's equity can be described as

1.

b. ownership claim on total assets.

2.

c. benefactor's claim on total assets.

3.

a. creditorship claim on total assets.

4.

d. debtor claim on total assets.

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.

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


3.

c. The revenues of corporations are greater than the combined revenues of

partnerships and proprietorships.

4.

b. Corporate businesses are generally smaller in size than partnerships and proprietorships.

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

a. Assets = Liabilities.

2.

c. Residual equity + Assets.

3.

d. Assets – Liabilities.

4.

b. Liabilities + Assets.

Collection of a $1,000 Accounts Receivable
1.

d. decreases an asset $1,000; decreases a liability $1,000.

2.

b. increases an asset $1,000; decreases a liability $1,000.

3.

a. increases an asset $1,000; decreases an asset $1,000.

4.

c. decreases a liability $1,000; increases owner's equity $1,000.

If total liabilities decreased by $15,000 and owner’s 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.

d. $25,000 increase

3.

c. $5,000 increase

4.

b. $5,000 decrease

A business that enjoys limited liability is a
1.

b. partnership.

2.

c. corporation.

3.

d. sole proprietorship.

4.

a. proprietorship.

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

d. revenues exceed expenses.

2.

c. expenses exceed revenues.

3.

b. drawings exceed investments.

4.

a. liabilities exceed assets.

A problem with the monetary unit assumption is that
1.

d. it is impossible to account for international transactions.

2.

b. the dollar has been stable over time.

3.

a. the dollar has not been stable over time.

4.

c. the dollar is a common medium of exchange.

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.

c. corporation.

2.

a. joint venture.


3.

b. partnership.

4.

d. proprietorship.

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

a. owner's investments.

2.

d. owner's drawings.

3.

b. owner's withdrawals.

4.

c. expenses.

Liabilities of a company would not include

1.

d. cash.

2.

a. notes payable.

3.

c. wages payable.

4.

b. accounts payable.

If total liabilities increased by $17,000 during a period of time and owner’s
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.

d. $23,000 increase.

2.

c. $11,000 increase.

3.

a. $23,000 decrease.

4.

b. $11,000 decrease.


Sources of increases to owner's equity are
1.

a. additional investments by owners.

2.

c. withdrawals by the owner.

3.

d. expenses.

4.

b. purchases of merchandise.

Capital is
1.

d. equal to liabilities plus drawings.

2.

a. an owner's permanent investment in the business.

3.

c. equal to assets minus owner's equity.

4.

b. equal to liabilities minus owner's equity.

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

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

2.

a. unrelated to business transactions.

3.

b. a poor measure of economic activities.

4.

d. useless in measuring an economic event.

If total liabilities increased by $15,000 and owner’s 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.

c. $5,000 increase

2.

d. $25,000 increase


3.

a. $25,000 decrease

4.

b. $5,000 decrease

137 Sample Test Bank for Accounting Principles 11th
Edition by Weygand Multiple Choice Questions - Page 3
Which of the following (a, b, or c) is not a reason one set of international
accounting standards are needed?
1.

d. all of the above (a, b, or c) are reasons one set of international accounting standards
are needed.

2.

c. information technology.

3.

b. financial markets.

4.

a. multinational corporations.

Barsuk Company began the year with owner’s equity of $217,000. During the
year, Barsuk received additional owner investments of $294,000, recorded
expenses of $840,000, and had owner drawings of $56,000. If Barsuk’s ending
owner’s equity was $581,000, what was the company’s revenue for the year?
1.

c. $1,204,000.

2.

a. $910,000.

3.

d. $1,260,000.

4.

b. $966,000.

International standards are developed by the
1.

c. IASB.

2.

d. FASB.


3.

a. IFRS.

4.

b. GAAP.

The first part of the accounting process is
1.

b. identifying.

2.

a. communicating.

3.

c. processing.

4.

d. recording.

At October 1, Arcade Fire Enterprises reported owner’s equity of $35,000.
During October, the owner made additional investments of $5,000 and the
company posted a net loss of $2,000. If owner’s equity at October 31 totals
$35,000, what amount of owner drawings were made during the month?
1.

b. $2,000

2.

d. $5,000

3.

c. $3,000

4.

a. $0

Misra Company compiled the following financial information as of December
31, 2011: Revenues: $170,000; Owner’s Capital (1/1/11): 70,000; Equipment:
40,000; Expenses: 125,000; Cash: 45,000; Owner’s Drawings: 10,000;
Supplies: 5,000; Accounts payable: 20,000; Accounts receivable: 35,000;
Misra’s assets on December 31, 2011 are
1.

d $245,000.

2.

b. $125,000.


3.

a. $90,000.

4.

c. $180,000.

The internal control standards applicable to Sarbanes-Oxley apply to
1.

d. U.S. companies listed on U.S. exchanges.

2.

a. all U.S. and international companies.

3.

b. U.S. and international companies listed on U.S. exchanges.

4.

c. International companies listed on U.S. exchanges.

The conceptual framework that underlies IFRS
1.

a. is very similar to that used to develop GAAP.

2.

c. does not define equity.

3.

b. does not define assets or liabilities.

4.

d. does not define income or expenses.

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

b. rules-based.

2.

d. full of disclosure requirements.

3.

a. detailed.

4.

c. principles-based.

An income statement
1.

a. summarizes the changes in owner's equity for a specific period of time.