Response to the following multiple choice questions:
QUESTION 1. The Public Company Accounting Oversight Board (PCAOB) was created__________.
by the Sarbanes-Oxley Act (SOX)
to perform audits of public companies
to make restitution to investors who were defrauded by the issuance of fraudulent financial reports
to require auditors to take responsibility for the accuracy and completeness of financial reports from firms they audit
QUESTION 2. Which of the following statements is TRUE of a sole proprietorship?
A sole proprietorship joins two or more individuals as co-owners.
The sole proprietor is personally liable for the liabilities of the business.
A sole proprietorship is taxed separately from the owner.
A sole proprietorship has to pay business income taxes.
QUESTION 3. The earnings of a sole proprietorship are __________.
combined with the personal income of the proprietor
not combined with the proprietor's personal income
subject to double taxation
handled similarly to that of a corporation
QUESTION 4. Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?
Financial Accounting Standards Board
Institute of Management Accountants
American Institute of Certified Public Accountants
Securities and Exchange Commission
QUESTION 5. The equity of Alliance Company is $100,000 and the total liabilities are $10,000. The total assets are __________.
$200,000
$20,000
$90,000
$110,000
QUESTION 6. Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?
Securities and Exchange Commission (SEC)
Public Company Accounting Oversight Board (PCAOB)
Financial Accounting Standards Board (FASB)
American Institute of Certified Public Accountants (AICPA)
QUESTION 7. Transactions during the first year of operations are provided below. The owner, Sharon McCoy, contributed $10,000 cash in exchange for capital. Paid $1,100 cash for equipment to be used for plumbing repairs. Borrowed $12,000 from a local bank and deposited the money in the checking account.
Paid $300 rent for the year.
Purchased $200 of office supplies by cash.
Completed a plumbing repair project for a local lawyer and received $3,200 cash.
Calculate the amount of total liabilities at the end of the first year.
$12,000
$10,000
$20,900
$3,200
QUESTION 8. Hollywood Talent Services is a sole proprietorship operated by Phil Morris. The net income of Hollywood Talent Services is $23,000 for the year. The beginning and ending Morris, Capital account was $33,000 and $50,000, respectively. During the year, there were no new capital contributions. Calculate the amount of the owner's withdrawals for the year.
$16,000
$6,000
$10,000
$9,000
QUESTION 9. Spring Company has assets and equity that amount to $260,000 and $70,000, respectively. Liabilities total __________.
$70,000
$190,000
$260,000
$330,000
QUESTION 10. GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to __________.
Globally Accepted Accounting Policies
Government Approved Accounting Principles
Generally Accredited Accounting Policies
Generally Accepted Accounting Principles
QUESTION 11. Dynamic Production Services started the year with total assets of $130,000 and total liabilities of $50,000. The company is a sole proprietorship. The revenues and the expenses for the year amounted to $100,000 and $60,000, respectively. During theyear, there were no new capital contributions, and the owner withdrew $45,000.
Calculate Dynamic's net income for the year.
$40,000
$100,000
$60,000
$130,000
QUESTION 12. The Sarbanes-Oxley Act (SOX) __________.
requires independent accountants to take responsibility for the accuracy and completeness of the financial reports
created the SEC
ensures that financial scandals will no longer occur
requires companies to take responsibility for the accuracy and completeness of their financial reports
QUESTION 13. Maxwell Plumbing Services earned $500 by completing a job for Smith Company. The $500 earned by Maxwell Plumbing Services is its __________.
revenue
expense
gain
debt
QUESTION 14. Mulberry Company collected $7,000 from one of its customers, the amount owed from the previous month. How does this affect the accounting equation for Mulberry?
assets increase by $7,000; liabilities decrease by $7,000
assets increase by $7,000; assets decrease by $7,000
assets increase by $7,000; liabilities increase by $7,000
assets increase by $7,000; equity increases by $7,000
QUESTION 15. Green Lawns Company earned $500 for landscaping services rendered. The customer promised to pay at a later time. Which of the following accounts increasedas a result of this transaction?
Accounts Payable
Supplies
Cash
Accounts Receivable
QUESTION 16. __________ are professional accountants who serve the general public, not one particular company.
Certified public accountants
Financial managers
Internal auditors
Controllers
QUESTION 17. Managerial accounting provides information to __________.
internal decision makers
outside investors and lenders
creditors
taxing authorities
QUESTION 18. According to the __________, acquired assets should be recorded at the amount actually paid rather than at the estimated market value.
going concern assumption
economic entity concept
cost principle
monetary unit assumption
QUESTION 19. Lisa Smith decided to start her CPA practice as a sole proprietorship. The business purchased an office building for $35,000. The real estate agent said the building was worth $50,000 in the current market. The business recorded the building as a $50,000 asset because Lisa believes that is the real value of the building. Which of the following concepts or principles of accounting is being violated?
Cost principle
Economic entity assumption
Monetary unit assumption
Going concern assumption
QUESTION 20. Which of the following is the correct accounting equation?
Assets + Liabilities = Equity
Assets = Liabilities + Equity
Assets + Revenues = Equity
Assets + Revenues = Liabilities + Expenses