Type:
Test Bank
Resource:
Accounting Tools for Business Decision Making
Edition:
5th Edition
Author(s):
Paul D. Kimmel Jerry J. Weygandt Donald E. Kieso
CHAPTER 1 INTRODUCTION TO FINANCIAL STATEMENTS SUMMARY OF QUESTIONS BY LEARNING OBJECTIVE AND BLOOM’S TAXONOMY Item
LO
BT
Item
LO
1. 2. 3. 4. 5. 6. 7. 8.
1 1 1 1 1 2 2 2
K K K K K K K K
9. 10. 11. 12. 13. 14. 15. 16.
2 2 2 3 3 3 3 3
41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67.
1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2
K K K K K K K K K K C C K K C K K K K K K K K K K K K
68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94.
2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4
175. 176. 177. 178. 154.
1 3 4,5 4,5
C C AP AP
179. 180. 181. 182.
5 4,5 4 5
192. 193.
4,5 4,5
AP AP
194. 195.
5 4
BT
Item LO BT Item True-False Statements K 17. 3 K 25. K 18. 3 C 26. K 19. 3 K 27. K 20. 4 K 28. K 21. 4 K 29. K 22. 4 K 30. K 23. 4 K 31. K 24. 4 K 32. Multiple Choice Questions K 95. 4 AP 122. K 96. 4 K 123. K 97. 3 C 124. K 98. 3 C 125. C 99. 4 K 126. K 100. 4 K 127. K 101. 4 K 128. C 102. 4 C 129. C 103. 4 K 130. C 104. 4 C 131. K 105. 4 K 132. K 106. 4 K 133. K 107. 4 K 134. K 108. 4 K 135. K 109. 4 C 136 K 110. 5 K 137. K 111. 4 K 138. K 112. 4 K 139. K 113. 4 C 140. K 114. 4 K 141. K 115. 4 C 142. K 116. 4 K 143. K 117. 4 K 144. K 118. 4 C 145. K 119. 4 AP 146. K 120. 4 AP 147. AP 121. 4 AP 148. Brief Exercises AP 183. 5 AP 187. C 184. 5 AP 188. AP 185. 5 K 189. K 186. 5 C 190. Exercises AP 196. 4,5 AN 198. AP 197. 4,5 AP 199.
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LO
BT
Item
LO
BT
4 4 5 5 5 5 5 5
K K K C C C C C
33. 34. 35. 36. 37. 38. 39. 40.
5 5 6 6 6 6 6 6
K K K K K K K C
4 4 4 5 5 5 5 5 5 5 5 5 5 5 5 5 4 5 5 5 3 5 5 5 4 4 4
AP AN AN K K K AP AP AP AP AN AN AN AN AN K K K K K K K K K K C K
149. 150. 151. 152. 153. 154. 155. 156. 157. 158. 159. 160. 161. 162. 163. 164. 165. 166. 167. 168. 169. 170. 171. 172. 173. 174.
5 5 5 5 5 5 5 5 5 5 4 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6
K C C C AP AP AP AP AP AP K K AN AN AN AN AN K K K K K K K C K
5 5 5 5
C AN C AN
191.
5
AN
5 5
AP AN
200. 201.
5 5
AP AN
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
1-2
202. 203.
1 2
K K
210.
1-6
K
211. 212. 213.
1 1 2
K C C
204. 205.
3 5
K K
Completion Statements 206. 5 K 208. 207. 5 K 209.
5 6
K K
6 6 4
C E C
Matching
214. 215. 216.
2 5 5
K C C
Short Answer Essay 217. 5 AN 220. 218. 5 K 221. 219. 5 C 222.
*This topic is dealt with in an Appendix to the chapter.
SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
Item
Type
Item
Type
Learning Objective 1 Item Type Item Type
1.
TF
5.
TF
44.
MC
48.
MC
52.
MC
202.
CS
2.
TF
41.
MC
45.
MC
49.
MC
53.
MC
210.
Ma
3.
TF
42.
MC
46.
MC
50.
MC
54.
MC
211.
SA
4.
TF
43.
MC
47.
MC
51.
MC
175.
BE
212.
SA
Item
Type
Item
Type
214.
SA
Item
Type
Item
Type
Item
Type
Item
Type
Learning Objective 2 Item Type Item Type
6.
TF
55.
MC
61.
MC
67.
MC
73.
MC
7.
TF
56.
MC
62.
MC
68.
MC
74.
MC
8.
TF
57.
MC
63.
MC
69.
MC
75.
MC
9.
TF
58.
MC
64.
MC
70.
MC
203.
CS
10.
TF
59.
MC
65.
MC
71.
MC
210.
Ma
11.
TF
60.
MC
66.
MC
72.
MC
213.
SA
Item
Type
Item
Type
Item
Type
Item
Type
Learning Objective 3 Item Type Item Type
12.
TF
18.
TF
80.
MC
86.
MC
92.
MC
204.
CS
13.
TF
19.
TF
81.
MC
87.
MC
93.
MC
210.
Ma
14.
TF
76.
MC
82.
MC
88.
MC
97.
MC
15.
TF
77.
MC
83.
MC
89.
MC
98.
MC
16.
TF
78.
MC
84.
MC
90.
MC
142.
MC
17.
TF
79.
MC
85.
MC
91.
MC
176.
BE
.
Introduction to Financial Statements
1-3
Item
Type
Item
Type
Learning Objective 4 Item Type Item Type
20.
TF
96.
MC
107.
MC
117.
MC
146.
MC
193.
Ex
21.
TF
99.
MC
108.
MC
118.
MC
147.
MC
194.
Ex
22.
TF
100.
MC
109.
MC
119.
MC
148.
MC
195.
Ex
23.
TF
101.
MC
111.
MC
120.
MC
159.
MC
196.
Ex
24.
TF
102.
MC
112.
MC
121.
MC
177.
BE
197.
Ex
25.
TF
103.
MC
113.
MC
122.
MC
178.
BE
210.
Ma
26.
TF
104.
MC
114.
MC
123.
MC
180.
BE
222.
SA
94.
MC
105.
MC
115.
MC
124.
MC
181.
BE
95.
MC
106.
MC
116.
MC
138.
MC
192.
Ex
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Learning Objective 5 Item Type Item Type
27.
TF
130.
MC
144.
MC
161.
MC
187.
BE
215.
SA
28.
TF
131.
MC
145.
MC
162.
MC
188.
BE
216.
SA
29.
TF
132.
MC
146.
MC
163.
MC
189.
BE
217.
SA
30.
TF
133.
MC
149.
MC
164.
MC
190.
BE
218.
SA
31.
TF
134.
MC
150.
MC
165.
MC
191.
BE
219.
SA
32.
TF
135.
MC
151.
MC
177.
BE
196.
Ex
210.
Ma
33.
TF
136.
MC
152.
MC
178.
BE
198.
Ex
34.
TF
137.
MC
153.
MC
179.
BE
199.
Ex
110.
MC
138.
MC
154.
MC
180.
BE
200.
Ex
125.
MC
139
MC
155.
MC
182.
BE
201.
Ex
126.
MC
140
MC
156.
MC
183.
BE
205.
CS
127.
MC
141.
MC
157.
MC
184.
BE
206.
CS
128.
MC
142.
MC
158.
MC
185.
BE
207.
CS
129.
MC
143.
MC
160.
MC
186.
BE
208.
CS
Item
Type
Item
Type
Item
Type
Item
Type
Learning Objective 6 Item Type Item Type
35.
TF
39.
TF
168.
MC
172.
MC
210.
Ma
36.
TF
40.
TF
169.
MC
173.
MC
220.
SA
37.
TF
166.
MC
170.
MC
174.
MC
221.
SA
38.
TF
167.
MC
171.
MC
209.
CS
Note: TF = True-False MC = Multiple Choice Ma = Matching
C = Completion Ex = Exercise SA = Short Answer Essay
.
1-4
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
CHAPTER LEARNING OBJECTIVES 1. Describe the primary forms of business organization. A sole proprietorship is a business owned by one person. A partnership is a business owned by two or more people associated as partners. A corporation is a separate legal entity for which evidence of ownership is provided by shares of stock. 2. Identify the users and uses of accounting information. Internal users are managers who need accounting information to plan, organize, and run business operations. The primary external users are investors and creditors. Investors (stockholders) use accounting information to help them decide whether to buy, hold, or sell shares of a company’s stock. Creditors (suppliers and bankers) use accounting information to assess the risk of granting credit or loaning money to a business. Other groups who have an indirect interest in a business are taxing authorities, customers, labor unions, and regulatory agencies. 3. Explain the three principal types of business activity. Financing activities involve collecting the necessary funds to support the business. Investing activities involve acquiring the resources necessary to run the business. Operating activities involve putting the resources of the business into action to generate a profit. 4. Describe the content and purpose of each of the financial statements. An income statement presents the revenues and expenses of a company for a specific period of time. A retained earnings statement summarizes the changes in retained earnings that have occurred for a specific period of time. A balance sheet reports the assets, liabilities, and stockholders’ equity of a business at a specific date. A statement of cash flows summarizes information concerning the cash inflows (receipts) and outflows (payments) for a specific period of time. 5. Explain the meaning of assets, liabilities, and stockholders’ equity, and state the basic accounting equation. Assets are resources owned by a business. Liabilities are the debts and obligations of the business. Liabilities represent claims of creditors on the assets of the business. Stockholders’ equity represents the claims of owners on the assets of the business. Stockholders’ equity is subdivided into two parts: common stock and retained earnings. The basic accounting equation is: Assets = Liabilities + Stockholders’ Equity 6. Describe the components that supplement the financial statements in an annual report. The management discussion and analysis provides management’s interpretation of the company’s results and financial position as well as a discussion of plans for the future. Notes to the financial statements provide additional explanation or detail to make the financial statements more informative. The auditor’s report expresses an opinion as to whether the financial statements present fairly the company’s results of operations and financial position.
.
Introduction to Financial Statements
1-5
TRUE-FALSE STATEMENTS 1.
A business organized as a separate legal entity owned by stockholders is a partnership.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
2.
Corporate stockholders generally pay higher taxes but have no personal liability.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
3.
The liability of corporate stockholders is limited to the amount of their investment.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
4.
The majority of U.S. business is transacted by proprietorships.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
5.
Proprietorships in the United States generate more revenue than the other two forms of business enterprise.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
6.
Owners of business firms are the only people who need accounting information.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
7.
Management of a business enterprise is the major external user of information.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
8.
External users of accounting information are managers who plan, organize, and run a business.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
9.
The information needs and questions of external users vary considerably.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
10.
Accounting communicates financial information about a business to both internal and external users.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
11.
Two primary external users of accounting information are investors and creditors.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
12.
Financing activities for corporations include borrowing money and selling shares of their own stock.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
13.
Investing activities involve collecting the necessary funds to support the business.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
.
1-6 14.
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
The purchase of equipment is an example of a financing activity.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
15.
Assets are resources owned by a business and provide future services or benefits to the business.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
16.
Payments to owners are operating activities.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
17.
The economic resources that are owned by a business are called stockholders’ equity.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
18.
Operating activities involve putting the resources of the business into action to generate a profit.
Ans: T, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
19.
A business is usually involved in two types of activity—financing and investing.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
20.
Net income for the period is determined by subtracting total expenses and dividends from revenues.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
21.
A different set of financial statements usually is prepared for each user.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
22.
The heading for the income statement might include the line “As of December 31, 20xx.”
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
23.
Net income is another term for revenue.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
24.
Cash is another term for stockholders’ equity.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
25.
The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
26.
The balance sheet reports assets and claims to those assets at a specific point in time.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
.