Financial Accounting IFRS Edition, 1st Edition Test Bank by TBtutors

Type:

Test Bank

Resource:

Financial Accounting IFRS

Edition:

1st Edition

Author(s):

Jerry J. Weygandt Paul D. Kimmel Donald E. Kieso

CHAPTER 1 ACCOUNTING IN ACTION SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY Item

Item

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

1 1 1 2 2 2 2 2 2 2

K K C K K C K C K K

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

2 3 4 4 4 4 4 4 4 5

K K K K K K K K K C

51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80.

1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 3 3 4 4 4 4 4 4 4

K K K C K K K K C C C C C C K K K K K K C K C K K K C K K K

86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115.

5 5 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6

Item

7 7 7 7 7 8 8 8 8 8

K K C C C K K K K K

41. 42. a 43. sg 44. sg 45. sg 46. sg 47. sg 48. sg 49. sg 50.

8 9 9 1 2 3 5 6 7 8

K K K K K K K K K K

8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8

K K AP AP AP K C K K AP AP AP AP AP AP AP AP AP AP AP AP AP AN AN AN AN AN AP AP AP

191. 192. 193. 194. 195. 196. 197. 198. 199. 200. 201. 202. 203. 204. 205. 206. 207. 208. a 209. a 210. a 211. a 212. sg 213. st 214. st 215. st 216. st 217. sg 218. sg 219. sg 220.

8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 9 9 9 9 1 1 1 2 5 5 7 7

AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP K K K C K K K K K K C C

True-False Statements 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

5 5 6 6 6 6 6 6 6 7

K K K K K K K K K K

31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

Multiple Choice Questions K K K K K C C K K K K K K K C K K C K K K K K C K AP AP AP AP AP

121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135. 136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147. 148. 149. 150.

6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7

AP AP AP AP AP K K K K K K K K K K K K K K C AP C C C C C C K C C

156. 157. 158. 159. 160. 161. 162. 163. 164. 165. 166. 167. 168. 169. 170. 171. 172. 173. 174. 175. 176. 177. 178. 179. 180. 181. 182. 183. 184. 185.

1-2

Test Bank for Financial Accounting: IFRS Edition

81. 82. 83. 84. 85.

4 5 5 5 5

K K K K K

116. 117. 118. 119. 120.

6 6 6 6 6

K K K K AP

224. 225. 226.

2 6 6

C K K

227. 228. 229.

6 6 6

AP AP C

151. 152. 153. 154. 155.

7 7 8 8 8

AN C C C K

186. 187. 188. 189. 190.

8 8 8 8 8

AP AP AP AP AP

233. 234.

8 8

AP AP

221. 8 222. 8 sg 223. 9 sg

K K K

Brief Exercises

sg st a

230. 231. 232.

7 8 8

C AP C

This question also appears in the Study Guide. This question also appears in a self-test at the student companion website. This question covers a topic in an appendix to the chapter.

SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY Exercises 235. 236. 237. 238. 239. 240. 241. 242.

6 6 6 6 6 6 6 6

C C AP C AP AN AN C

243. 244. 245. 246. 247. 248. 249. 250.

6,7 6,7 6,7 7 7 7 7 7

C C AP AP AP C AN C

270. 271.

1 2

K K

272. 273.

4 4

K K

251. 252. 253. 254. 255. 256. 257. 258.

7 7 7 7 7 7 7 8

C AP C C C C C AP

259. 260. 261. 262. 263. 264. 265. 266.

8 8 8 8 8 8 8 8

AP AP AN AP AP C AP AN

6 8

K K

267. 268. 269.

8 8 8

C AP AP

9 9

K K

Item

Type

271.

Completion Statements 274. 275.

5 6

K K

276. 277.

278 279. .

SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE Item

Type

Item

Type

Item

1. 2. 3.

TF TF TF

33. 51. 52.

TF MC MC

53. 54. 55.

4. 5. 6. 7.

TF TF TF TF

8. 9. 10. 11.

TF TF TF TF

45. 59. 60. 61.

12.

46.

72.

13. 14. 15.

TF TF TF

16. 17. 18.

TF TF TF

19. 36. 74.

Type

Item

Type

Item

Study Objective 1 MC 56. MC 213. MC 57. MC 214. MC 58. MC 215. Study Objective 2 TF 62. MC 66. MC 63. MC 67. MC 64. MC 68. MC 65. MC 69. Study Objective 3 MC 73. MC Study Objective 4 TF 75. MC 78. TF 76. MC 79. MC 77. MC 80.

Type

Item

Type

MC MC MC

270.

MC MC MC MC

70. 71. 216. 224.

MC MC MC BE

MC MC MC

81. 272. 273.

MC C C

Accounting in Action

20. 21. 22. 47.

TF TF TF TF

81. 82. 83. 84.

MC MC MC MC

85. 86. 87. 88.

23. 24. 25. 26. 27. 28. 29. 48.

TF TF TF TF TF TF TF TF

97. 98. 99. 100. 101. 102. 103. 104.

MC MC MC MC MC MC MC MC

105. 106. 107. 108. 109. 110. 111. 112.

Study Objective 5 MC 89. MC 93. MC 90. MC 94. MC 91. MC 95. MC 92. MC 96. Study Objective 6 MC 113. MC 122. MC 115. MC 123. MC 116. MC 124. MC 117. MC 125. MC 118. MC 225. MC 119. MC 226. MC 120. MC 227. MC 121. MC 228.

MC MC MC MC

217. 218. 274.

MC MC C

MC MC MC MC BE BE BE BE

229. 235. 236. 237. 238. 239. 240. 241.

BE Ex Ex Ex Ex Ex Ex Ex

1-3

242. 243. 244. 245. 275. 276.

Ex Ex Ex Ex C C

SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE

30. TF 31. TF 32. TF 33. TF 34. TF 35. TF 49. TF 126. MC 127. MC

128. 129. 130. 131. 132. 133. 134. 135. 136.

MC MC MC MC MC MC MC MC MC

137. 138. 139. 140. 141. 142. 143. 144. 145.

36. TF 37. TF 38. TF 39. TF 40. TF 41. TF a 42. TF a 43. TF 50. TF 153. MC 154. MC 155. MC

156. 157. 158. 159. 160. 161. 162. 163. 164. 165. 166. 167.

MC MC MC MC MC MC MC MC MC MC MC MC

168. 169. 170. 171. 172. 173. 174. 175. 176. 177. 178. 179.

210.

209.

211.

Note: TF = True-False MC = Multiple Choice

Study Objective 7 MC 146. MC 230. MC 147. MC 243. MC 148. MC 244. MC 149. MC 245. MC 150. MC 246. MC 151. MC 247. MC 152. MC 248. MC 219. MC 249. MC 220. MC 250. Study Objective 8 MC 180. MC 192. MC 181. MC 193. MC 182. MC 194. MC 183. MC 195. MC 184. MC 196. MC 185. MC 197. MC 186. MC 198. MC 187. MC 199. MC 188. MC 200. MC 189. MC 201. MC 190. MC 202. MC 191. MC 203. Study Objective 9 a MC a212. MC 223. BE = Brief Exercise Ex = Exercise

BE Ex Ex Ex Ex Ex Ex Ex Ex

251. 252. 253. 254. 255. 256. 257. 258. 259.

Ex Ex Ex Ex Ex Ex Ex Ex Ex

260. 261. 262.

Ex Ex Ex

MC MC MC MC MC MC MC MC MC MC MC MC

204. 205. 206. 207. 208. 221. 222. 231. 232. 233. 234. 258.

MC MC MC MC MC MC MC BE BE BE BE Ex

259. 260. 261. 262. 263. 264. 265. 266. 267. 268. 269. 277.

Ex Ex Ex Ex Ex Ex Ex Ex Ex Ex Ex C

278.

279.

C = Completion

This chapter also contains one set of ten Matching questions and Short-Answer Essay questions. A summary table of all learning outcomes, including AACSB, AICPA, and IMA professional standards, is available on the Weygandt instructor web site.

1-4

Test Bank for Financial Accounting: IFRS Edition

CHAPTER STUDY OBJECTIVES 1. Explain what accounting is. Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. 2. Identify the users and uses of accounting. The major users and uses of accounting are as follows: (a) Management uses accounting information in planning, controlling, and evaluating business operations. (b) Investors (owners) decide whether to buy, hold, or sell their financial interests on the basis of accounting data. (c) Creditors (suppliers and bankers) evaluate the risks of granting credit or lending money on the basis of accounting information. Other groups that use accounting information are taxing authorities, regulatory agencies, customers, labor unions, and economic planners. 3. Understand why ethics is a fundamental business concept. Ethics are the standards of conduct by which actions are judged as right or wrong. If you cannot depend on the honesty of the individuals you deal with, effective communication and economic activity would be impossible, and information would have no credibility. 4. Explain accounting standards and the measurement principles. Accounting is based on standards, such as International Financial Reporting Standards (IFRS). IFRS generally uses one of two measurement principles, the cost principle or the fair value principle. Selection of which principle to follow generally relates to trade-offs between relevance and faithful representation. 5. Explain the monetary unit assumption and the economic entity assumption. The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money. The economic entity assumption requires that the activities of each economic entity be kept separate from the activities of its owner and other economic entities. 6. State the accounting equation, and define its components. The basic accounting equation is: Assets = Liabilities + Equity Assets are resources owned by a business. Liabilities are creditorship claims on total assets.. Equity is the ownership claim on total assets. 7. Analyze the effects of business transactions on the accounting equation. Each business transaction must have a dual effect on the accounting equation. For example, if an individual asset increases, there must be a corresponding (1) decrease in another asset, or (2) increase in a specific liability, or (3) increase in equity. 8. Understand the four financial statements and how they are prepared. An income statement presents the revenues and expenses of a company for a specified period of time. A retained earnings statement summarizes the changes in retained earnings that have occurred for a specific period of time. A statement of financial position reports the assets, liabilities, and equity of a business at a specific date. A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time. a

9. Explain the career opportunities in accounting. Accounting offers many different jobs in fields such as public and private accounting, government, and forensic accounting. Accounting is a popular major because there are many different types of jobs, with unlimited potential for career advancement.

Accounting in Action

1-5

TRUE-FALSE STATEMENTS 1.

Owners of business firms are the only people who need accounting information. Ans: F SO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Transactions that can be measured in dollars and cents are recorded in the financial information system. Ans: T SO1 BT: K Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

The hiring of a new company president is an economic event recorded by the financial information system. Ans: F SO1 BT: C Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Management of a business enterprise is the major external user of information. Ans: F SO2 BT: K Difficulty: Easy TOT: .5 min AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reportin g

Accounting communicates financial information about a business enterprise to both internal and external users. Ans: T SO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting information is used only by external users with a financial interest in a business enterprise. Ans: F SO2 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Financial statements are the major means of communicating accounting information to interested parties. Ans: T SO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process. Ans: F SO2 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

The origins of accounting are attributed to Luca Pacioli, a famous mathematician. Ans: T SO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

10.

The State Administration of Taxation in the People's Republic of China is an example of an internal user of accounting information. Ans: F SO2 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

11.

The German Confederation of Trade Unions is an example of an external user of accounting information. Ans: T SO2 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

12.

Accountants rely on a fundamental business concept—ethical behavior—in reporting financial information. Ans: T SO3 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

13.

The primary accounting standard-setting body in the United States is the International Accounting Standards Board. Ans: F SO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1-6 14.

Test Bank for Financial Accounting: IFRS Edition The Financial Accounting Standards Board is a part of the International Accounting Standards Board. Ans: F SO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

15.

The two primary accounting standard-setting bodies are the International Accounting Standards Board and the Financial Accounting Standards Board. Ans: T SO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

16.

Most companies in the United States follow standards issued by the IASB. Ans: F SO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

17.

International Financial Reporting Standards are determined by the IASB. Ans: T SO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

18.

The process of reducing the differences between Generally Accepted Accounting principles and International Financial Reporting standards is known as convergence. Ans: F SO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

19.

IFRS follows one measurement principle knows as the cost principle. Ans: F SO4 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

20.

Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should be kept separate from the personal activities of the owners. Ans: T SO5 BT: C Difficulty; Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

21.

The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities. Ans: T SO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

22.

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records. Ans: T SO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

23.

In order to possess future service potential, an asset must have physical substance. Ans: F SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

24.

Owners' claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses. Ans: F SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

25.

The basic accounting equation states that Assets = Liabilities. Ans: F SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

26.

Share capital is the total amount paid in by shareholders for shares purchased. Ans: T SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

27.

The principal source of equity is amounts paid in by shareholders. Ans: F SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

28.

Expenses are increases in equity that result from operating the business. Ans: F SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting in Action 29.

1-7

The two components of equity are retained earnings and share capital. Ans: T SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

30.

The purchase of an asset on account increases assets and decreases equity. Ans: F SO7 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

31.

Providing services for cash increases assets and equity. Ans: T SO7 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

32.

Accountants record both internal and external transactions. Ans: T SO7 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

33.

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company. Ans: F SO7 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

34.

The purchase of store equipment for cash reduces the equity by an equal amount. Ans: F SO7 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

35.

The purchase of office equipment on credit increases total assets and total liabilities. Ans: T SO7 BT: C Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

36.

The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company during a period. Ans: T SO8 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

37.

Net income for the period is determined by subtracting total expenses and dividends from total revenues. Ans: F SO8

38.

BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

The ending retained earnings balance is reported on the statement of financial position. Ans: T SO8 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

39.

The statement of financial position is also known as the balance sheet. Ans: T SO8

BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Compared to IFRS, GAAP tend to be simpler and less detailed. Ans: F SO8 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

41.

Foreign companies whose shares are traded on U.S. stock markets must use GAAP. Ans: F SO8

42.

BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

The study of accounting is not useful for a business career unless your career objective is to become an accountant. Ans: F SO9 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

43.

Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs. Ans: T SO9 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1-8

Test Bank for Financial Accounting: IFRS Edition

Additional True-False Questions 44.

Identifying is the process of keeping a chronological diary of events measured in dollars and cents. Ans: F SO1 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

45.

Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation. Ans: F SO2 BT: K Difficulty; Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

46.

Accountants do not have to worry about issues of ethics. Ans: F SO3 BT: K Difficulty: Easy TOT: .5 min. AACSB: Ethics AICPA BB: Critical Thinking AICPA FN: Reporting

47.

The monetary unit assumption requires that all dollar amounts be rounded to the nearest dollar. Ans: F SO5 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

48.

The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets. Ans: T SO6 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

49.

External transactions involve economic events between the company and some other enterprise or party. Ans: T SO7 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

50.

In the retained earnings statement, revenues are listed first, followed by expenses, and net income (or net loss). Ans: F SO8 BT: K Difficulty: Easy TOT: .5 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Answers to True-False Statements Item

1. 2. 3. 4. 5. 6. 7. 8.

Ans.

Item

Ans.

Item

Ans.

Item

Ans.

Item

Ans.

Item

Ans.

Item

Ans.

F T F F T F T F

9. 10. 11. 12. 13. 14. 15. 16.

T F T T F F T F

17. 18. 19. 20. 21. 22. 23. 24.

T T F T T T F F

25. 26. 27. 28. 29. 30. 31. 32.

F T F F T F T T

33. 34. 35. 36. 37. 38. 39. 40.

F F T T F T T F

41. 42. 43. 44. 45. 46. 47. 48.

F F T F F F F T

49. 50.

T F

Accounting in Action

1-9

MULTIPLE CHOICE QUESTIONS 51.

Accountants refer to an economic event as a a. purchase. b. sale. c. transaction. d. change in ownership. Ans: c SO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reportin g

52.

The process of recording transactions has become more efficient because a. fewer events can be quantified in financial terms. b. computers are used in processing business events. c. more people have been hired to record business transactions. d. business events are recorded only at the end of the year. Ans: b SO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

53.

Communication of economic events is the part of the accounting process that involves a. identifying economic events. b. quantifying transactions into dollars and cents. c. preparing accounting reports. d. recording and classifying information. Ans: c SO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

54.

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction? a. The appointment of a new accounting firm to perform an audit. b. The purchase of a new computer. c. The sale of store equipment. d. Payment of income taxes. Ans: a SO1 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

55.

The use of computers in recording business events a. has made the recording process more efficient. b. does not use the same principles as manual accounting systems. c. has greatly impacted the identification stage of the accounting process. d. is economical only for large businesses. Ans: a SO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

56.

The accounting process involves all of the following except a. identifying economic transactions that are relevant to the business. b. communicating financial information to users by preparing financial reports. c. recording nonquantifiable economic events. d. analyzing and interpreting financial reports. Ans: c SO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1 - 10 57.

Test Bank for Financial Accounting: IFRS Edition The accounting process is correctly sequenced as a. identification, communication, recording. b. recording, communication, identification. c. identification, recording, communication. d. communication, recording, identification. Ans: c SO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

58.

Which of the following techniques are not used by accountants to interpret and report financial information? a. Graphs. b. Special memos for each class of external users. c. Charts. d. Ratios. Ans: b SO1 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

59.

Which of the following would not be considered an internal user of accounting data for the GHI Company? a. President of the company. b. Production manager. c. Merchandise inventory clerk. d. President of the employees' labor union. Ans: d SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

60.

Which of the following would not be considered an external user of accounting data for the GHI Company? a. Taxing authority representative. b. Management. c. Creditors. d. Customers. Ans: b SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

61.

Which of the following would not be considered internal users of accounting data for a company? a. The president of a company. b. The controller of a company. c. Creditors of a company. d. Salesmen of the company. Ans: c SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

62.

Which of the following is an external user of accounting information? a. Labor unions. b. Finance directors. c. Company officers. d. Managers. Ans: a SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting in Action 63.

1 - 11

Which one of the following is not an external user of accounting information? a. Regulatory agencies. b. Customers. c. Investors. d. All of these are external users. Ans: d SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

64.

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process? a. Identification. b. Communication. c. Recording. d. Analysis. Ans: c SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

65.

Internal users of accounting information include all of following except the a. CEO of Sony. b. Human Resources department at Hyundai. c. Marketing department at Braun. d. Shareholders of Airbus. Ans: d SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

66.

Internal users of accounting information include a. the shareholders of Royal Dutch Shell. b. the State Administration of Taxation of China. c. the Chief Financial officer of Credit Suisse. d. the International Accounting Standards Board. Ans: c SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

67.

External users of accounting information include all of following except a. the shareholders of Air Italy. b. the management of Pirelli. c. a potential customers of Olivetti. d. All of the above are external users of accounting information. Ans: b SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

68.

External users of accounting information include the a. lnternational Accounting Standards Board. b. shareholders of Ferragamo. c. Marketing department at Olivetti. d. CEO of Air Italy. Ans: b SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

69.

The origins of accounting are generally attributed to the work of a. Christopher Columbus. b. Abner Doubleday. c. Luca Pacioli. d. Leonardo da Vinci. Ans: c SO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1 - 12 70.

Test Bank for Financial Accounting: IFRS Edition Financial accounting provides economic and financial information for all of the following except a. creditors. b. investors. c. managers. d. other external users. Ans: c SO2 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

71.

The final step in solving an ethical dilemma is to a. identify and analyze the principal elements in the situation. b. recognize an ethical situation. c. identify the alternatives and weigh the impact of each alternative on stakeholders. d. recognize the ethical issues involved. Ans: c SO2 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

72.

The first step in solving an ethical dilemma is to a. identify and analyze the principal elements in the situation. b. identify the alternatives. c. recognize an ethical situation and the ethical issues involved. d. weigh the impact of each alternative on various stakeholders. Ans: c SO3 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Ethics AICPA BB: Critical Thinking AICPA FN: Reporting

73.

Ethics are the standards of conduct by which one's actions are judged as a. right or wrong. b. honest or dishonest. c. fair or unfair. d. all of these. Ans: d SO3 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Ethics AICPA BB: Critical Thinking AICPA FN: Reporting

74.

The cost principle requires that companies record assets at their a. appraisal value. b. cost. c. market price. d. list price. Ans: b SO4 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

75.

IFRSs are determined by the a. Internal Accounting Standards Body. b. International Accounting Studies Board. c. International Accounting Standards Board. d. International Auditors' Standards Body. Ans: c SO4 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

76.

GAAP stands for a. Generally Accepted Auditing Procedures. b. Generally Accepted Accounting Principles. c. Generally Accepted Auditing Principles. d. Generally Accepted Accounting Procedures. Ans: b SO4 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting in Action 77.

1 - 13

The Duce Company has five plants nationwide that cost $100 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at a. $100 million. b. $600 million. c. $400 million. d. $500 million. Ans: a SO4 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

78.

Convergence refers to a. using the same accounting principles from one period to the next. b. use of the same accounting principles by all companies. c. the elimination of all accounting standard-setting bodies except the International Accounting Standards Board. d. the process of reducing the differences between IFRS and GAAP. Ans: d SO4 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

79.

The body that has the power to prescribe the accounting practices and standards used by most US companies is the a. FASB. b. IASB. c. GAAP. d. IFRS. Ans: a SO4 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

80.

The fair value principle a. is one of the two costing principles followed by the IASB. b. is more useful than the cost principle for valuing some assets. c. dictates that an asset should be valued at the price at which it could be sold. d. All of the above. Ans: d SO4 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

81.

Most assets should be valued at cost because fair values a. are not useful for decision-making. b. may not be representationally faithful. c. are not relevant. d. may be higher or lower than historical cost. Ans: b SO4 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

82.

Harrod's inc. purchased land for ₤50,000 in 2001. At December 31, 2010, an appraisal determined the fair value of the land is ₤65,000. If Harrod's follows the cost principle, in the 2010 financial statements, the land will be reported at a. ₤50,000 on the statement of financial position. b. ₤65,000 on the statement of financial position. c. ₤50,000 on the income statement. d. ₤65,000 on the income statement. Ans: a SO5 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1 - 14 83 .

Test Bank for Financial Accounting: IFRS Edition Hyundai inc. purchased land for W122,000,000 in 2002. At December 31,2011, an appraisal determined the fair value of the land is W136,000,0000. If Hyundai follows the cost principle, the land will be reported on the statement of financial position at a. W108,000,000. b. W122,000,000. c. W136,000,000. d. W150,000,000. Ans: b SO5 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

84.

Bumi Corporation purchased an investment in the ordinary shares of another corporation for Rp250,000,000 in 2009. The shares are actively traded on the Indonesian Stock Exchange. The fair value of the investment at December 31, 2011 is Rp266,000,000. If the company follows the fair value principle, the investment will be reported in the 2011 financial statement at a. Rp250,000,000 on the statement of financial position. b. Rp266,000,000 on the statement of financial position. c. Rp250,000,000 on the retained earnings statement. d. Rp265,000,000 on the retained earnings statement. Ans: b SO5 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

85.

Asian Company purchased land for W96,000,000 in 2000. At December 31, 2011, an appraisal determined the fair value of the land is W106,000,000. The company has an investment in the ordinary shares of another company for which it paid W49,000,000 in 2009.The shares are actively traded on the South Korea Stock Exchange. The fair value of the investment at December 31, 2011 is W66,000,000. The land and investment will be reported on the December 31, 2011 statement of financial position at a. W96,000,000 and W49,000,000, respectively. b. W96,000,000 and W66,000,000, respectively. c. W106,000,000 and W49,000,000, respectively. d. W106,000,000 and W66,000,000, respectively. Ans: b SO5 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

86.

The proprietorship form of business organization a. must have at least three owners in most states. b. requires that the owner be personally liable for all debts of the business. c. combines the records of the business with the personal records of the owner. d. is characterized by a legal distinction between the business as an economic unit and the owner. Ans: b SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

87.

The economic entity assumption requires that the activities a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. 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. Ans: d SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting in Action 88.

1 - 15

A business organized as a corporation a. is not a separate legal entity in most states. b. requires that shareholders be personally liable for the debts of the business. c. is owned by its shareholders. d. terminates when one of its original shareholders dies. Ans: c SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

89.

The partnership form of business organization a. is a separate legal entity. b. is a common form of organization for service-type businesses. c. enjoys an unlimited life. d. has limited liability. Ans: b SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

90.

Which of the following is not an advantage of the corporate form of business organization? a. Limited liability of shareholders b. Transferability of ownership c. Unlimited personal liability for shareholders d. Unlimited life Ans: c SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

91.

A small neighborhood barber shop that is operated by its owner would likely be organized as a a. joint venture. b. partnership. c. corporation. d. proprietorship. Ans: d SO5 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

92.

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 a. joint venture. b. partnership. c. corporation. d. proprietorship. Ans: b SO5 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

93.

Which of the following is true regarding the corporate form of business organization? a. Corporations are the most prevalent form of business organization. b. Corporate businesses are generally smaller in size than partnerships and proprietorships. c. The revenues of corporations are greater than the combined revenues of partnerships and proprietorships. d. Corporations are separate legal entities organized exclusively under federal law. Ans: c SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1 - 16 94.

Test Bank for Financial Accounting: IFRS Edition 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 a. stand alone concept. b. monetary unit assumption. c. corporate form of ownership. d. economic entity assumption. Ans: d SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

95.

The assumption that enables accounting to quantify (measure) economic events is the a. economic entity assumption. b. cost principle. c. historical cost principle. d. monetary unit assumption. Ans: d SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

96.

A business that enjoys limited liability is a a. proprietorship. b. partnership. c. corporation. d. sole proprietorship. Ans: c SO5 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

97.

The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit. Ans: d SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

98.

Equity is best depicted by the following: a. Assets = Liabilities. b. Liabilities + Assets. c. Residual equity + Assets. d. Assets – Liabilities. Ans: d SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

99.

The basic accounting equation may be expressed as a. Assets = Equities. b. Assets – Liabilities = Equity. c. Assets = Liabilities + Equity. d. all of these. Ans: d SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

100.

Liabilities a. are future economic benefits. b. are existing debts and obligations. c. possess service potential. d. are things of value used by the business in its operation. Ans: b SO6 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting in Action 101.

1 - 17

Liabilities of a company would not include a. notes payable. b. accounts payable. c. wages payable. d. cash. Ans: d SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

102.

Liabilities of a company are owed to a. debtors. b. benefactors. c. creditors. d. underwriters. Ans: c SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

103.

Equity can be described as a. creditorship claim on total assets. b. ownership claim on total assets. c. benefactor's claim on total assets. d. debtor claim on total assets. Ans: b SO6 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

104.

Equity is often referred to as a. residual equity. b. leftovers. c. spoils. d. second equity. Ans: a SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

105.

When assets are distributed to the shareholders of a corporation, these distributions are termed a. depletions. b. consumptions. c. dividends. d. a credit line. Ans: c SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

106.

A dividend is a. a distribution of the company's earnings to its stockholders. b. equal to liabilities minus equity. c. equal to assets minus equity. d. equal to revenues less expenses. Ans: a SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

107.

Revenues would not result from a. sale of merchandise. b. issuance of common stock. c. performance of services. d. rental of property. Ans: b SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1 - 18 108.

Test Bank for Financial Accounting: IFRS Edition Sources of increases to equity are a. sales of shares. b. purchases of merchandise. c. dividends. d. expenses. Ans: a SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

109.

The basic accounting equation cannot be restated as a. Assets – Liabilities = Equity. b. Assets – Equity = Liabilities. c. Equity + Liabilities = Assets. d. Assets + Liabilities = Equity. Ans: d SO6 BT: C Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

110.

Equity is decreased by all of the following except a. sales of shares. b. dividends. c. expenses. d. net losses. Ans: a SO6 BT: K Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

111.

If total liabilities increased by ¥30,000 and equity increased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period? a. ¥40,000 decrease b. ¥40,000 increase c. ¥50,000 increase d. ¥60,000 increase Ans: b SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

112.

If total liabilities decreased by ¥30,000 and equity increased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period? a. ¥40,000 increase b. ¥20,000 decrease c. ¥20,000 increase d. ¥30,000 decrease Ans: b SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

113.

If total liabilities decreased by ¥25,000 and equity increased by ¥5,000 during a period of time, then total assets must change by what amount and direction during that same period? a. ¥20,000 decrease b. ¥20,000 increase c. ¥25,000 increase d. ¥30,000 increase Ans: a SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting in Action 114.

1 - 19

If total liabilities decreased by ¥30,000 and equity decreased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period? a. ¥40,000 increase b. ¥20,000 increase c. ¥40,000 decrease d. ¥20,000 decrease Ans: c SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

115.

If total liabilities increased by ¥21,000 during a period of time and equity decreased by ¥9,000 during the same period, then the amount and direction of the period’s change in total assets is a(n) a. ¥21,000 increase. b. ¥30,000 increase. c. ¥12,000 decrease. d. ¥12,000 increase. Ans: d SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

116.

The equity section of a statement of financial position has two components: a. share capital and liablities. b. assets and liablities. c. share capital and retained earnings. d. share capital and assets. Ans: c SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

117.

A company increases its share capital by a. selling ordinary shares to its investors. b. performing services for cash. c. selling goods on account. d. paying dividends to its shareholders. Ans: a SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

118.

The retained earnings section of the statement of financial position is determined by a. assets,liabilities anad share capital. b. revenues, expenses and share capital. c. share capital. dividends and residual equity. d. revenues,expenses and dividends. Ans: d SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

119.

All of the following transactions increase revenue except the a. sale of additional ordinary shares by British Airways. b. sale of clothing by the French Connection. c. performance of acccounting services by PricewatershouseCoopers. d. sale of pertroleum by Royal Dutch Shell. Ans: a SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1 - 20 120.

Test Bank for Financial Accounting: IFRS Edition As of December 31, 2011, Dolce & Gabanna Inc. had assets of €5,700,000, share capital of €2,100,000 and retained earnings of €2,400,000. Total liabilities as of that date are a. €0. b. €1,200,000. c. €14,500,000. d. €10,200,000. Ans: b SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

121.

On its December 31, 2011 statement of financial position, Adaro Corporation reported liabilities of Rp2,566,000,000, share capital of Rp1,331,000,000 and retained earnings of Rp2,101,000,000. Total assets as of December 31, 2011 are a. Rp866,000,000. b. Rp2,101,000,000. c. Rp3,432,000,000. d. Rp5,998,000,000. Ans: d SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

122.

As of December 31, 2011, Oxford-welsh Inc. had assets of ₤3,260,000, liabilities of ₤990,000, and share capital of ₤1,410,000. Retained earnings as of that date are a. ₤860,000. b. ₤1,850,000. c. ₤2,270,000. d. ₤3,260,000. Ans: a SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

123.

As of December 31, 2011, Thames Company reported assets of ₤4,320,000, liabilities of ₤1,280,000 and retained earnings of ₤2,210,000. Share capital reported on the December 31, 2011 statement of financial position is a. ₤830,000. b. ₤930,000. c. ₤3,490,000. d. ₤6,530,000. Ans: a SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

124.

As of December 31, 2011, Deitrich Inc. had assets of €8,700,000, liabilities of €3,100,000, share capital of ₤2,200,000 and retained earnings of €3,400,000. Total equity as of that date are a. €2,200,000. b. €2,500,000. c. €5,600,000. d. €8,700,000. Ans: c SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

125.

As of December 31, 2011, Lojas Company reported assets of R$3,700,000, liabilities of R$1,100,000, share capital of R$990,000 and retained earnings of R$1,610,000. Total equity reported on the statement of financial position as of that date is a. R$620,000. b. R$2,600,000. c. R$2,700.000. d. R$3,700,000. Ans: b SO6 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

Accounting in Action 126.

1 - 21

On January 11,2011, Britannica Corporation sold ordinary shares to investors for ₤6,550,000. This transaction will increase assets and a. decrease liabilities by ₤6,550,000. b. decrease equity by ₤6,550,000 c. increase revenues by ₤6,550,000. d. increase equity by ₤6,550,000. Ans: d SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

127.

Burgundy Inc. purchased supplies on account for €26,000. This transaction will a. increase liabilities and decrease equity by €26,000. b. increase assets and decrease equity by €26,000 c. increase assets and increase liabilities by €26,000. d. have no effect on the accounting equation. Ans: c SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

128.

Sao Paulo Company performed services on account for R$160,000. This transaction will a. increase assets and liabilities by R$160,000. c. increase assets and equity by R$160,000. c. increase liabilities and equity by R$160,000. d. have no effect on the accounting equation. Ans: b SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

129.

Bennoit Corporation paid dividends totaling €295,000 to its shareholders. This transaction will decrease assets and a. decrease equity by €295,000. b. decrease liabilities by €295,000 c. increase expenses by €295,000. d. have no effect on the accounting equation. Ans: a SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

130.

Gafisa Inc. performed services for R$195,000. The company collected R$95,000 in cash. The balance will be collected in 30 days. This transaction will increase a. assets by R$95,000 and equity by R$100,000. b. assets by R$95,000, liablities by R$100,000 and equity by R$195,000 c. liabilites and equity by R$195,000. d. assets and equity by R$195,000. Ans: d SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

131.

On June 6, Wing Wah Inc. purchased supplies on account for HK$50,000. On June 30, the company paid half of the balance due. The June 30 payment will a. decrease Cash and increase Supplies Expense by HK$ 50,000. b. increase Cash and decrease Accounts Receivable by HK$25,000 c. decrease Cash and decrease Accounts Payable by HK$25,000 d. decrease Supplies and increase Supplies Expense by HK$25,000. Ans: c SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

1 - 22 132.

Test Bank for Financial Accounting: IFRS Edition On November 4, Vivo Company performed services on account for R$295,000. On November 26, the company collected the balance due. The November 26 transaction will increase a. Cash and Accounts Payable by R$295,000. b. Accounts Receivable and Revenue by R$295,000 c. Cash and decrease Accounts receivable by R$295,000 d. Revenue and decrease Accounts Receivable by R$295,000. Ans: c SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

133.

Freirs Company paid the monthly rent of €6,000. This transaction will a. increase cash and decrease Rent Expense by €6,000. b. decrease cash and decrease Rent Expense by €6,000 c. decrease cash and increase Rent Expense by €6,000 d. have no effect on the accounting equation Ans: c SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

134.

Vita Corporation performed services on account for €22,000. This transaction will a. increase Cash and increase Revenues by €22,000. b. increase Accounts Receivable and increase Revenue by €22,000 c. decrease Accounts Payable and increase Cash by €22,000 d. increase Cash and decrease Accounts Receivable by €22,000. Ans: b SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

135.

On February 1, Potter Company paid £900 for advertisements to run during the month of February. This transaction will a. decrease Cash and increase Advertising Expense by £900. b. increase Advertiing Expense and increase Accounts Payable by £900. c. decrease Accounts payable and decrease Cash by £900. d. decrease Cash and decrease Advertising Expense by £900. Ans: a SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

136.

McDonagal Inc. sold ordinary shares for £2,200,000. This transaction will increase a. Cash and increase Retianed earning by £2,200,000. b. Cash and increase Share Capital by £2,200,000. c. Revenue and increase Share Capital by £2,200,000. d. Revenue and increase Cash by £2,200,000. Ans: b SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

137.

An investment of cash by an owner of a business increases assets and a. increases liabilities. b. increases equity. c. decreases equity. d. decreases liabilities. Ans: b SO7 BT: AP Difficulty: Easy TOT: 1.0 min. AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting