Test Bank For Accounting Principles, 11th Edition

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CHAPTER 1ACCOUNTING IN ACTIONSUMMARY OF QUESTIONS BYLEARNINGOBJECTIVES AND BLOOM’STAXONOMYItemLOBTItemLOBTItemLOBTItemLOBTItemLOBTTrue-False Statements1.1K9.2K17.4K25.6Ksg33.1K2.1K10.2K18.4K26.6Ksg34.2K3.1C11.2K19.4K27.7Ksg35.3K4.2K12.2K20.5C28.7Csg36.4C5.2K13.2K21.5K29.7Csg37.5K6.2C14.2K22.5K30.7Csg38.6K7.2K15.3K23.5K31.8Ksg39.7K8.2C16.4K24.6K32.8Ksg40.8KMultiple Choice Questions41.1K69.4C97.6K125.8Kst153.1K42.1K70.4K98.6K126.8Kst154.1K43.1K71.4K99.6K127.8APsg155.2K44.1C72.4C100.6C129.8APst156.2K45.1K73.4K101.6K129.8APsg157.4K46.1K74.5K102.6C130.8Kst158.4K47.1K75.5K103.6AP131.8Csg159.5K48.1K76.5K104.6AP132.8Ksg160.6K49.2C77.5K105.6AP133.8Ksg161.7C50.2C78.5K106.6AP134.8APsg162.7C51.2C79.5C107.6AP135.8APsg163.8K52.2C80.5C108.6C136.8AP164.10K53.2C81.5K109.6AP137.8AP165.10K54.2C82.5K110.6C138.8AP166.10Ka55.9K83.5C111.6C139.8AP167.10Ka56.9K84.5K112.7C140.8AP168.10Ka57.9K85.5K113.7C141.8AP169.10Ka58.9C86.5K114.6C142.8AP170.10K59.2K87.5K115.7C143.8AP171.10K60.2K88.6K116.7K144.8AP172.10K61.3C89.6K117.7C145.8AP173.10K62.3K90.6K118.7C146.8AP174.10K63.3C91.6C119.7C147.8AN175.10K64.4K92.6K120.7AN148.8AN176.10K65.4K93.6K121.7C149.8AN177.10K66.4C94.6C122.8C150.8AN67.4K95.6K123.8C151.8AN68.4K96.6K124.8Ksg152.1KsgThis question also appears in the Study Guide.stThis question also appears in aself-test at thestudentcompanion website.aThis question covers a topic in anappendix to the chapter.

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Test Bank for Accounting Principles, Eleventh EditionFOR INSTRUCTOR USE ONLY1-2SUMMARY OF QUESTIONS BYLEARNINGOBJECTIVES AND BLOOM’STAXONOMYBrief Exercises178.2C181.6AP184.7C187.8AP179.6K182.6AP185.8AP188.8AP180.6K182.6C4186.8CExercises189.2,4K197.6C205.7C213.8AP221.8AN190.6C198.6,7C206.7C214.8AP222.8C191.6C199.6,7C207.7AP215.8AP223.8AP192.6AP200.6,7AP208.7C216.8AN224.8AP193.6C201.7AP209.7C217.8AP225.8AP194.6AP202.7AP210.7C218.8AP195.6AN203.7C211.7C219.8C196.6AN204.7AN212.7C220.8APCompletion Statements226.1K228.2K230.4K232.5K234.6K227.2K229.2K231.4K233.6K235.8KSUMMARY OFLEARNINGOBJECTIVES BY QUESTION TYPEItemTypeItemTypeItemTypeItemTypeItemTypeItemTypeItemTypeLearningObjective 11.TF33.TF43.MC46.MC152.MC226.C2.TF41.MC44.MC47.MC153.MC3.TF42.MC45.MC48.MC154.MCLearningObjective 24.TF8.TF12.TF49.MC53.MC155.MC227.C5.TF9.TF13.TF50.MC54.MC156.MC228.C6.TF10.TF14.TF51.MC59.MC178.BE229.C7.TF11.TF34.TF52.MC60.MC175.ExLearningObjective 315.TF35.TF61.MC62.MC63.MCLearningObjective 416.TF19.TF65.MC68.MC71.MC157.MC230.C17.TF36.TF66.MC69.MC72.MC158.MC231.C18.TF64.MC67.MC70.MC73.MC189.ExLearningObjective 520.TF37.TF77.MC81.MC85.MC232.C21.TF74.MC78.MC82.MC86.MC22.TF75.MC79.MC83.MC87.MC23.TF76.MC80.MC84.MC159.MC

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Accounting in ActionFOR INSTRUCTOR USE ONLY1-3SUMMARY OFLEARNINGOBJECTIVES BY QUESTION TYPELearningObjective 624.TF91.MC98.MC105.MC182.BE195.Ex234.C25.TF92.MC99.MC106.MC183.BE196.Ex26.TF93.MC100.MC107.MC190.Ex197.Ex38.TF94.MC101.MC160.MC191.Ex198.Ex88.MC95.MC102.MC179.BE192.Ex199.Ex89.MC96.MC103.MC180.BE193.Ex200.Ex90.MC97.MC104.MC181.BE194.Ex233.CLearningObjective 727.TF113.MC120.MC185.Ex205.Ex197.Ex217.Ex28.TF115.MC121.MC186.Ex206.Ex198.Ex29.TF116.MC161.MC201.Ex207.Ex213.Ex30.TF117.MC162.MC202.Ex208.Ex214.Ex39.TF118.MC184.BE203.Ex209.Ex215.Ex112.MC119.MC184.Ex204.Ex196.Ex216.ExLearningObjective 831.TF129.MC139.MC149.MC201.Ex225.Ex32.TF130.MC140.MC150.MC202.Ex235.C40.TF131.MC141.MC151.MC217.Ex122.MC132.MC142.MC163.MC218.Ex123.MC133.MC143.MC185.BE219.Ex124.MC134.MC144.MC186.BE220.Ex125.MC135.MC145.MC187.BE221.Ex126.MC136.MC146.MC188.BE222.Ex127.MC137.MC147.MC199.Ex223.Ex128.MC138.MC148.MC200.Ex224.ExLearningObjective 9a55.MCa56.MCa57.MCa58.MCLearning Objective 10164.MC166.MC168.MC170.MC172.MC174.MC176.MC165.MC167.MC169.MC171.MC173.MC175.MC177.MCNote:TF=True-FalseBE=Brief ExerciseC=CompletionMC=Multiple ChoiceEx=ExerciseThischapter also contains one set of ten Matching questions andShort-Answer Essay questions.A summary table of all learning outcomes, including AACSB, AICPA, and IMA professionalstandards, is available on the WeygandtAccounting Principles11einstructor web site.

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Test Bank for Accounting Principles, Eleventh EditionFOR INSTRUCTOR USE ONLY1-4CHAPTERLEARNINGOBJECTIVES1.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 areasfollows: (a) Managementuses accounting informationtoplan,organize, andrun thebusiness.(b) Investors (owners)decidewhether to buy, hold, or sell their financial interestson the basisof accounting data. (c) Creditors (suppliers and bankers) evaluatethe risks of granting creditor lending moneyon the basis of accountinginformation. Othergroupsthat use accountinginformationare taxing authorities, regulatory agencies, customers,andlabor unions.3.Understand why ethics is a fundamental business concept.Ethics are the standards ofconduct by which actions are judged as right or wrong.Effective financial reporting dependson sound ethical behavior.4.Explaingenerallyacceptedaccountingprinciples.Generallyacceptedaccountingprinciples are a common set of standards used by accountants.5.Explainthemonetaryunitassumptionandtheeconomicentityassumption.Themonetary unit assumption requires thatcompanies include in the accounting recordsonlytransaction datathat canbe expressed in terms of money. The economic entity assumptionrequires that the activities of each economic entity be kept separate from the activities of itsowner(s)and other economic entities.6.Statetheaccountingequation,anddefineitscomponents.Thebasicaccountingequation is:Assets = Liabilities + Owner's EquityAssets are resources owned by a business. Liabilities are creditorship claims on total assets.Owner's equity is the ownership claim on total assets.The expanded accounting equation is:Assets=Liabilities+Owner's Capital−Owner's Drawings+Revenues−ExpensesOwner's Capital is assets the owner puts into the business. Owner's drawings are the Assetsthe owner withdrawsfor personal use.Revenues are increases in assets resulting fromincome-earning activities. Expenses are the costs of assets consumed of services used in theprocess of earning revenue.7.Analyze the effectsof business transactions on the accounting equation.Each businesstransaction must have a dual effect on the accounting equation. For example, if an individualasset increases, there must be a corresponding (1) decrease in another asset, or (2) increasein a specific liability, or (3) increase in owner's equity.8.Understandthefourfinancialstatementsandhowtheyareprepared.Anincomestatement presents the revenues and expenses,and resulting Net income or Net lossfor aspecificperiod of time. An owner's equity statement summarizes the changes in owner'sequity for a specific period of time. A balance sheet reports the assets, liabilities, and owner'sequity at a specific date. A statement of cash flows summarizes information about the cashinflows (receipts) and outflows (payments) for a specific period of time.a9.Explain the career opportunities in accounting. Accounting offers many different jobs infieldssuchaspublicandprivateaccounting,governmental,andforensicaccounting.Accounting is a popular major because there are many different types of jobs, with unlimitedpotential for career advancement.

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Accounting in ActionFOR INSTRUCTOR USE ONLY1-5TRUE-FALSE STATEMENTS1.Owners of business firms are the only people who need accounting information.Ans: FLO1BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting2.Transactions that can be measured in dollars and cents are recorded in the financialinformation system.Ans: TLO1BT: KDifficulty: EasyTOT: .5 minAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting3.The hiring of a new company president is an economic event recorded by the financialinformation system.Ans: FLO1BT: CDifficulty: Easy TOT: .5 minAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting4.Management of a business enterprise is the major external user of information.Ans: FLO2BT: KDifficulty: EasyTOT: .5 minAACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting5.Accountingcommunicatesfinancialinformationaboutabusinessenterprisetobothinternal and external users.Ans: TLO2BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting6.Accounting information is used only by external users with a financial interest in abusiness enterprise.Ans: FLO2BT: CDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting7.Financial statements are the major means of communicating accounting information tointerested parties.Ans: TLO2BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting8.Bookkeeping and accounting are one and the same because the bookkeeping functionincludes the accounting process.Ans: FLO2BT: CDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting9.The origins of accounting are attributed to Luca Pacioli, a famous mathematician.Ans: TLO2BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting10.The study of accounting will be useful only if a student is interested in working for a profit-oriented business firm.Ans: FLO2BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting11.Private accountants are accountants who are not employees of business enterprises.Ans: FLO2BT:KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting12.The study of accounting is not useful for a business career unless your career objective isto become an accountant.Ans: FLO2BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting13.A working knowledge of accounting is not relevant to a lawyer or an architect.Ans: FLO2BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting14.Expressinganopinionastothefairnessoftheinformationpresentedinfinancialstatements is a service performed by CPAs.Ans: TLO2BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Test Bank for Accounting Principles, Eleventh EditionFOR INSTRUCTOR USE ONLY1-615.Accountants rely on a fundamental business concept—ethical behavior—in reportingfinancial information.Ans: TLO3BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting16.Theprimary accounting standard-setting body in the United States is the InternationalAccounting Standards Board.Ans: FLO4BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting17.The Financial Accounting Standards Board is a part of the Securities and ExchangeCommission.Ans: FLO4BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting18.TheSecuritiesandExchangeCommissionoverseesU.S.financialmarketsandaccounting standard-setting bodies.Ans: TLO4BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting19.The cost and fair market value of an asset are the same at the time of acquisition and inall subsequent periods.Ans: FLO4BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting20.Even though a partnership is not a separate legal entity, for accounting purposes thepartnership affairs should be kept separate from the personal activities of the owners.Ans: TLO5BT: CDifficulty; EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting21.A partnership must have more than one owner.Ans: TLO5BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting22.The economic entity assumption requires that the activities of an entity be kept separateand distinct from the activities of its owner and all other economic entities.Ans: TLO5BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting23.The monetary unit assumption states that transactions that can be measured in terms ofmoney should be recorded in the accounting records.Ans: TLO5BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting24.In order to possess future service potential, an asset must have physical substance.Ans: FLO6BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting25.Owners' claims to total business assets take precedence over the claims of creditorsbecause owners invest assets in the business and are liable for losses.Ans: FLO6BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting26.The basic accounting equation states that Assets = Liabilities.Ans: FLO6BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting27.Accountants record both internal and external transactions.Ans: TLO7BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting28.Internaltransactionsdonotaffectthebasicaccountingequationbecausetheyareeconomic events that occur entirely within one company.Ans: FLO7BT: CDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Accounting in ActionFOR INSTRUCTOR USE ONLY1-729.The purchase of store equipment for cash reduces the owner's equity by an equalamount.Ans: FLO7BT: CDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting30.The purchase of office equipment on credit increases total assets and total liabilities.Ans: TLO7BT: CDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting31.The primary purpose of the statement of cash flows is to provide information about thecash receipts and cash payments of a company during a period.Ans: TLO8BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting32.Net income for the period is determined by subtracting total expenses and drawings fromtotal revenues.Ans: FLO8BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting33.Identifying is the process of keeping a chronological diary of events measured in dollarsand cents.Ans: FLO1BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting34.Management consulting includes examining the financial statements of companies andexpressing an opinion as to the fairness of their presentation.Ans: FLO2BT: KDifficulty; EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting35.Accountants do not have to worry about issues of ethics.Ans: FLO3BT: KDifficulty: EasyTOT: .5 min.AACSB: EthicsAICPA BB: Critical ThinkingAICPA FN: Reporting36.At the time an asset is acquired, cost andfairvalue should be the same.Ans: TLO4BT: CDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting37.The monetary unit assumption requires that all dollar amounts be rounded to the nearestdollar.Ans: FLO5BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting38.The basic accounting equation is in balance when the creditor and ownership claimsagainst the business equal the assets.Ans: TLO6BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting39.External transactions involve economic events between the company and some otherenterprise or party.Ans: TLO7BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting40.In the owner's equity statement, revenues are listed first, followed by expenses, and netincome (or net loss).Ans: FLO8BT: KDifficulty: EasyTOT: .5 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Test Bank for Accounting Principles, Eleventh EditionFOR INSTRUCTOR USE ONLY1-8Answers to True-False StatementsItemAns.ItemAns.ItemAns.ItemAns.ItemAns.ItemAns.ItemAns.1.F7.T13.F19.F25.F31.T37.F2.T8.F14.T20.T26.F32.F38.T3.F9.T15.T21.T27.T33.F39.T4.F10.F16.F22.T28.F34.F40.F5.T11.F17.F23.T29.F35.F6.F12.F18.T24.F30.T36.TMULTIPLE CHOICE QUESTIONS41.Accountants refer to an economic event as aa.purchase.b.sale.c.transaction.d.change in ownership.Ans: cLO1BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting42.The process of recording transactions has become more efficient becausea.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: bLO1BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting43.Communication of economic events is the part of the accounting process that involvesa.identifying economic events.b.quantifying transactions into dollars and cents.c.preparing accounting reports.d.recording and classifying information.Ans: cLO1BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting44.Which of the following events cannot be quantified into dollars and cents and recorded asan accounting transaction?a.The appointment of a new CPA firm to perform an audit.b.The purchase of a new computer.c.The sale of store equipment.d.Payment of income taxes.Ans: aLO1BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting45.The use of computers in recording business eventsa.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.iseconomical only for large businesses.Ans: aLO1BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Accounting in ActionFOR INSTRUCTOR USE ONLY1-946.The accounting process involves all of the followingexcepta.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: cLO1BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting47.The accounting process is correctly sequenced asa.identification, communication, recording.b.recording, communication, identification.c.identification, recording, communication.d.communication, recording, identification.Ans: cLO1BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting48.Which of the following techniques arenotused by accountants to interpret and reportfinancial information?a.Graphs.b.Special memos for each class of external users.c.Charts.d.Ratios.Ans: bLO1BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting49.Which of the following wouldnotbe considered an internal user of accounting data for theGHICompany?a.President of the company.b.Production manager.c.Merchandise inventory clerk.d.President of the employees' labor union.Ans: dLO2BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting50.Which of the following wouldnotbe considered an external user of accounting data forthe GHICompany?a.Internal Revenue Service Agent.b.Management.c.Creditors.d.Customers.Ans: bLO2BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting51.Which of the following wouldnotbe considered internal users of accounting data for acompany?a.The president of a company.b.The controller of a company.c.Creditors of a company.d.Salesmen of the company.Ans: cLO2BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Test Bank for Accounting Principles, Eleventh EditionFOR INSTRUCTOR USE ONLY1-1052.Which of the following is an external user of accounting information?a.Labor unions.b.Finance directors.c.Company officers.d.Managers.Ans: aLO2BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting53.Which one of the following isnotan external userof accounting information?a.Regulatory agencies.b.Customers.c.Investors.d.All of theseanswers choicesare external users.Ans: dLO2BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting54.Bookkeeping differs from accounting in that bookkeeping primarily involves which part ofthe accounting process?a.Identification.b.Communication.c.Recording.d.Analysis.Ans: cLO2BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reportinga55.All of the following are services offered by public accountantsexcepta.budgeting.b.auditing.c.tax planning.d.consulting.Ans: aLO9BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reportinga56.Which list below best describes the major services performed by public accountants?a.Bookkeeping, mergers, budgets.b.Employee training, auditing, bookkeeping.c.Auditing, taxation, management consulting.d.Cost accounting, production scheduling, recruiting.Ans: cLO9BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reportinga57.Preparing tax returns and engaging in tax planning is performed bya.public accountants only.b.private accountants only.c.both public and private accountants.d.IRS accountants only.Ans: cLO9BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reportinga58.A private accountant can perform many activities in a business organization but wouldnotwork ina.budgeting.b.accounting information systems.c.external auditing.d.tax accounting.Ans: cLO9BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Accounting in ActionFOR INSTRUCTOR USE ONLY1-1159.The origins of accounting are generally attributed to the work ofa.Christopher Columbus.b.Abner Doubleday.c.Luca Pacioli.d.Leonardo da Vinci.Ans: cLO2BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting60.Financial accounting provides economic and financial information for all of the followingexcepta.creditors.b.investors.c.managers.d.other external users.Ans: cLO2BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting61.The final step in solving an ethical dilemma is toa.identify and analyze the principal elements in the situation.b.recognize an ethical situation.c.identify the alternatives and weigh the impact of each alternativeon stakeholders.d.recognize the ethical issues involved.Ans: cLO2BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting62.The first step in solving an ethical dilemma is toa.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: cLO3BT: KDifficulty: EasyTOT:1.0min.AACSB: EthicsAICPA BB: Critical ThinkingAICPA FN: Reporting63.Ethics are the standards of conduct by which one's actions are judged asa.right or wrong.b.honest or dishonest.c.fair or unfair.d.all of theseanswer choices are correct.Ans: dLO3BT: CDifficulty: EasyTOT:1.0min.AACSB: EthicsAICPA BB: Critical ThinkingAICPA FN: Reporting64.Generally accepted accounting principles area.income tax regulations of the Internal Revenue Service.b.standards that indicate how to report economic events.c.theories that are based on physical laws of the universe.d.principles that have been proven correct by academic researchers.Ans: bLO4BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting65.Thehistoricalcost principle requires that when assets are acquired, they be recorded ata.appraisal value.b.cost.c.marketprice.d.book value.Ans:bLO4BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Test Bank for Accounting Principles, Eleventh EditionFOR INSTRUCTOR USE ONLY1-1266.Thehistoricalcost of an asset and its fair value area.never the same.b.the same when the asset is sold.c.irrelevant when the asset is used by the business in its operations.d.the same on the date of acquisition.Ans:dLO4BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting67.The body of theory underlying accounting isnotbased ona.physical laws of nature.b.concepts.c.principles.d.definitions.Ans:aLO4BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting68.The private sector organization involved in developing accounting principles is thea.Feasible Accounting Standards Body.b.Financial Accounting Studies Board.c.Financial Accounting Standards Board.d.Financial Auditors' Standards Body.Ans: cLO4BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting69.The SEC and FASB are two organizations that are primarily responsible for establishinggenerally accepted accounting principles.It is true thata.they are both governmental agencies.b.the SEC is a private organization of accountants.c.the SEC often mandates guidelines when no accounting principles exist.d.the SEC and FASB rarely cooperate in developing accounting standards.Ans: cLO4BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting70.GAAP stands fora.Generally Accepted Auditing Procedures.b.Generally Accepted Accounting Principles.c.Generally Accepted Auditing Principles.d.Generally Accepted Accounting Procedures.Ans: bLO4BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting71.Financial information that is capable of making a difference in a decision isa.faithfully representative.b.relevant.c.convergent.d.generally accepted.Ans: bLO4BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting72.The DuceCompany has five plants nationwide that costa total of$100 million. Thecurrentfairvalue of the plants is $500 million. The plants will be recorded and reported asassets ata.$100 million.b.$600 million.c.$400 million.d.$500 million.Ans: aLO4BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Accounting in ActionFOR INSTRUCTOR USE ONLY1-1373.The fair value principle is applied fora.all assets.b.current assets.c.buildings.d.investment securities.Ans: dLO4BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting74.The proprietorship form of business organizationa.must have at least three owners in most states.b.represents the largest number of businesses in the United States.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 andthe owner.Ans: bLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting75.The economic entity assumption requires that the activitiesa.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 ofits owners.d.of an entity be kept separate from the activities of its owner.Ans: dLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting76.A business organized as a corporationa.is not a separate legal entity in most states.b.requires that stockholders be personally liable for the debts of the business.c.is owned by its stockholders.d.terminates when one of its original stockholders dies.Ans: cLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting77.The partnership form of business organizationa.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: bLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting78.Which of the following isnotan advantage of the corporate form of business organization?a.Limited liability of stockholdersb.Transferability of ownershipc.Unlimited personal liability for stockholdersd.Unlimited lifeAns: cLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting79.A small neighborhood barber shop that is operated by its owner would likely be organizedas aa.joint venture.b.partnership.c.corporation.d.proprietorship.Ans: dLO5BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Test Bank for Accounting Principles, Eleventh EditionFOR INSTRUCTOR USE ONLY1-1480.John and Sammet 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 businessorganization for a business such as this would be aa.joint venture.b.partnership.c.corporation.d.proprietorship.Ans: bLO5BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting81.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 proprietor-ships.c.The revenues of corporations are greater than the combined revenues of partnershipsand proprietorships.d.Corporations are separate legal entities organized exclusively under federal law.Ans: cLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting82.A basic assumption of accounting that requires activities of an entity be kept separatefrom the activities of its owner is referred to as thea.stand alone concept.b.monetary unit assumption.c.corporate form of ownership.d.economic entity assumption.Ans: dLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting83.Ted Leoisthe proprietor (owner) ofTed's, a retailer of golfapparel. When recording thefinancial transactions ofTed's,Teddoes not record an entry for a carhe purchased forpersonal use.Tedtook out a personal loan to pay for the car. What accounting conceptguidesTed'sbehavior in this situation?a.Pay back conceptb.Economic entity assumptionc.Cash basis conceptd.Monetary unit assumptionAns: bLO5BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting84.A basic assumption of accounting assumes that the dollar isa.unrelated to business transactions.b.a poor measure of economic activities.c.the common unit of measure for all business transactions.d.useless in measuring an economic event.Ans: cLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting85.The assumption that the unit of measure remains sufficiently constant over time is part ofthea.economic entity assumption.b.cost principle.c.historical cost principle.d.monetary unit assumption.Ans: dLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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Accounting in ActionFOR INSTRUCTOR USE ONLY1-1586.A business that enjoy limited liability is aa.proprietorship.b.partnership.c.corporation.d.sole proprietorship.Ans: cLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting87.A problem with the monetary unit assumption is thata.the dollar has not been stable over time.b.the dollar has been stable over time.c.the dollar is a common medium of exchange.d.it is impossible to account for international transactions.Ans: aLO5BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting88.The common characteristic possessed by all assets isa.long life.b.great monetary value.c.tangible nature.d.future economic benefit.Ans: dLO6BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting89.Owner's equity is best depicted by the following:a.Assets = Liabilities.b.Liabilities + Assets.c.Residual equity + Assets.d.Assets–Liabilities.Ans: dLO6BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting90.The basic accounting equation may be expressed asa.Assets = Equities.b.Assets–Liabilities = Owner's Equity.c.Assets = Liabilities + Owner's Equity.d.All of these answer choices are correct..Ans: dLO6BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting91.Liabilitiesa.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: bLO6BT: CDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting92.Liabilities of a company wouldnotincludea.notes payable.b.accounts payable.c.salaries andwages payable.d.cash.Ans: dLO6BT: KDifficulty: EasyTOT:1.0min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: Reporting

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