Question 1
Which of the following transactions does not involve an exchange of value?
Payment of debt
Purchasing a building on credit
Borrowing money
Loss from theft
Question 2
Most business enterprises in the United States are
government units
partnerships
sole proprietorships
corporations
Question 3
Dividends of a corporation are declared by its
board of directors
officers
stockholders
creditors
Question 4
Which of the following is the correct accounting equation?
Assets = Liabilities + Stockholders' Equity
Assets + Stockholders' Equity = Liabilities
Assets = Liabilities - Stockholders' Equity
Assets + Liabilities = Stockholders' Equity
Question 5
The best definition of an assets is the
cash owned by the company
resources belonging to a company having future benefit to the company
collection of resources belong to the company and the claims on these resources
owner's investment in the business
Question 6
Which of the following represents the proper order of financial statement presentation?
Statement of cash flows, balance sheet, income statement, statement of retained earnings
Statement of retained earnings, income statement, statement of cash flows, balance sheet
Balance sheet, statement of cash flows, statement of retained earnings, income statement
Income statement, statement of retained earnings, balance sheet, statement of cash flows
Question 7
Which of the following is not a measurement issue in accounting?
When to record a business transaction.
How to classify the items of a business transaction.
When to classify the items of a business transaction.
Where to record a business transaction.
Question 8
The issue of deciding when to record a transaction is solved by
properly classifying the transaction.
deciding on a point of recognition.
assigning historical cost to the transaction.
analyzing the intent of management.
Question 9
The cost principle relates most closely to the
recognition point.
recognition issue.
valuation issue.
classification issue.
Question 10
After initially recording an asset at cost, fair value is
the price at which an asset could be sold in a current transaction between independent parties.
the actual, or historical, price at which the asset was acquired.
the easiest value used to measure and record assets.
verifiable at all future dates by referring to the invoice price paid for the asset.
Question 11
The double-entry system
requires that each transaction be recorded with at least one debit and one credit.
requires that the total amount of the debits must always equal the total amount of the credits.
is based on the principle of duality.
All of these choices.
Question 12
Which of the following is the final step in the accounting cycle?
Prepare financial statements.
Close the accounts.
Prepare an adjusted trial balance.
Post the journal entries to the ledger.
Question 13
Which of the following transactions results in the recognition of an expense?
Expiration of the usefulness of equipment during the accounting period.
Payment on an account payable.
Declaration and payment of dividends.
Payment on the principal portion of a loan.
Question 14
A net loss results in a decrease in
revenues.
expenses.
stockholders' equity.
liabilities.
Question 15
Which of the following transactions results in an increase in revenues?
Receipt of accounts receivable.
Purchase of inventory.
Receipt of principal from a bank loan.
Delivery of a service in exchange for future payment.
Question 16
When expenses exceed revenues,
a liability is created.
a net loss occurs.
stockholders' equity increases.
All of these choices.
Question 17
The matching rule is applied
because it is required by the Internal Revenue Code.
by expensing certain items immediately and in their entirety.
to help make the bookkeeper's job easier.
to help produce an accurate measurement of a company's performance.
Question 18
Failure to record depreciation at year end will result in all of the following except
understatement of total liabilities.
overstatement of total assets.
overstatement of net income.
overstatement of stockholders' equity.
Question 19
All of the following must certify that a public company's financial statements are accurate, complete, and not misleading, except for the
chief financial officer.
director of human resources.
chief executive officer.
independent auditor.
Question 20
According to the FASB, the usefulness of accounting is judged by which of the following two qualitative characteristics of accounting information?
Comparability and neutrality
Understandability and comparability
Verifiability and timeliness
Relevance and faithful representation
Question 21
A practical decision to expense a $120 printer rather than record it as property, plant, and equipment and depreciate it probably is made on the basis of the convention of
conservatism.
consistency.
materiality.
full disclosure.
Question 22
Wh Which of the following would not appear in the owner's equity section of a corporation?
W. Muller, Capital
Retained earnings
Additional paid-in capital
Common stock
Question 23
Which of the following accounts is most likely to appear on the balance sheet as a current liability?
Accumulated Depreciation
Bonds Payable
Mortgage Payable
Wages Payable
Question 24
The normal operating cycle helps define which of the following balance sheet sections?
Stockholders' equity
Current liabilities
Intangible assets
Property, plant, and equipment
Question 25
Positive operating income will result if gross margin exceeds
operating expenses.
purchases.
cost of goods sold.
cost of goods sold minus operating expenses.