1.) Which of the following is not a transaction to be recorded in the accounting records of an entity?
a. Investment of cash by the owners.
b. Sale of product to customers.
c. Receipt of a plaque recognizing the firm's encouragement of employee participation in the United Way fund drive.
d. Receipt of services from a "quick-print" shop in exchange for the promise to provide advertising design services of equivalent value.
2.) Transactions are summarized in
a. Financial statement footnotes.
b. The independent auditor's opinion letter.
c. The entity's accounts.
d. None of these.
3.) Which of the following is not a principal form of business organization?
a. Partnership.
b. Sole proprietorship.
c. Limited unregistered business.
d. Corporation.
e. None of these.
4.) Current Generally Accepted Accounting Principles and auditing standards require the financial statements of an entity for the reporting period to include:
a. Earnings and gross receipts of cash for the period.
b. Projected earnings for the subsequent period.
c. Financial position at the end of the period.
d. Current market values of all assets at the end of the period.
5.) Owners' equity refers to which to the following?
a. A listing of the organization's assets and liabilities.
b. The ownership right of the owner(s) of the entity.
c. Probable future sacrifices of economic benefits.
d. All of these.
e. None of these.
6.) The distinction between a current asset and other assets
a. is based on how long the asset has been owned.
b. is based on amounts that will be paid to other entities within a year.
c. is based on the ability to determine the current fair market value of the asset.
d. is based on when the asset is expected to be converted to cash, or used to benefit the entity.
7.) The time frame associated with an income statement is:
a. a point in time in the past.
b. a past period of time.
c. a future period of time.
d. a function of the information included in it.
8.) Expenses are:
a. cash disbursements.
b. decreases in net assets from uninsured accidents.
c. decreases in net assets from dividends to stockholders.
d. decreases in net assets resulting from usual operating activities.
9.) The Statement of Changes in Owners' Equity shows:
a. the change in cash during a year.
b. revenues, expenses, and liabilities for the period.
c. net income and dividends for the period.
d. paid-in capital and long-term debt at the end of the period.
10.) Retained Earnings represents:
a. the amount invested in the entity by the owners.
b. cash that is available for dividends.
c. cumulative net income that has not been distributed to owners as dividends.
d. par value of common stock outstanding.
11.) Additional paid-in-capital represents:
a. The difference between the total amounts invested by the owners and the par or stated value of the stock.
b. Distributions of earnings that have been made to the owners.
c. Distributions of earnings that have not been made to the owners.
d. The summation of the total amount invested by the owners and the par or stated value of the stock.
12.) The Statement of Cash Flows:
a. Shows how cash changed during the period.
b. Is an optional financial statement.
c. Shows the change in the market value of the entity's common stock during the period.
d. Shows the dividends that will be paid in the future.
13.) On January 31, an entity's balance sheet showed total assets of $750 and liabilities of $250. Owners' equity at January 31 was:
a. $ 500
b. $1,000
c. $ 750
d. $ 250
14.) On January 31, an entity's balance sheet showed net assets of $1,025 and liabilities of $225 Owners' equity on January 31 was:
a. $ 800
b. $1,025
c. $1,250
d. $ 225
15.) (For Question 15 and 16)
At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and owners' equity of $836. During the year, assets increased $74 and liabilities decreased $38.
Owners' equity at the end of the year totaled:
a. $836
b. $872
c. $948
d. $1,438
16.) Liabilities at the end of the year totaled:
a. $490
b. $528
c. $836
d. $910
17.) The going concern concept refers to a presumption that:
a. the entity will be profitable in the coming year.
b. the entity will not be involved in a merger within a year.
c. the entity will continue to operate in the foreseeable future.
d. top management of the entity will not change in the coming year.
18.) A concept or principle that relates to transactions is:
a. materiality
b. full disclosure
c. original cost
d. consistency
19.) Accrual accounting:
a. is designed to match revenues and expenses.
b. results in the balance sheet showing the fair market value of the entity's assets.
c. means that expenses are recorded when they are paid.
d. cannot result in the entity having net income unless cash is received from customers.
20.) The principle of consistency means that:
a. the accounting methods used by an entity never change.
b. the same accounting methods are used by all firms in an industry.
c. the effect of any change in an accounting method will be disclosed in the financial statements or notes thereto.
d. there are no alternative methods of accounting for the same transaction.