Question 1

A parcel of land is offered for sale at $600,000,is assessed for tax purposes at $500,000,is recognized by its purchasers as easily being worth $575,000,and is sold for $570,000.At what amount should the land be recorded in the purchaser's books? What accounting principle supports your answer?

Accepted Answer

$570,000.The Measurement (Cost...

Question 2

Match the following terms with the appropriate definition.
-Accounting equation

Accepted Answer

A)  The principle that assumes transactions and events can be expressed in money units.
B)  The cost of assets or services used to earn revenue.
C)  The principle that requires a business to be accounted for separately from its owners.
D)  Describes a company's revenues and expenses along with the resulting net income or loss over a period of time.
E)  Creditor's claims on assets.F) The relation between a company's assets, liabilities, and equity.G) The principle that revenue is recorded when earned through providing goods or services.H) A financial statement that lists cash inflows (receipts)  and cash outflows (payments) ; the cash flows are arranged by operating, investing, and financing activities.I) Happenings, such as changes in market value, that effect the accounting equation and are reliably measured.J) E) and F)
K) All of the above

Question 3

The Superior Company acquired a building for $500,000.The building was appraised at a value of $575,000.The seller had paid $300,000 for the building 6 years ago.Which accounting principle would require Superior to record the building on its records at $500,000?

Accepted Answer

A)   Monetary unit assumption.
B)   Going-concern assumption.
C)   Measurement (Cost)  principle.
D)   Business entity assumption.
E)   Revenue recognition principle.F) A) and B)
G) A) and C)

Question 4

The income statement reports all of the following except:

Accepted Answer

A)   Revenues earned by a business.
B)   Expenses incurred by a business.
C)   Assets owned by a business.
D)   Net income or loss earned by a business.
E)   The time period over which the earnings occurred.F) B) and E)
G) A) and B)

Question 5

Match the following terms with the appropriate definition.
-Accounting specialists that have met educational and experience requirements,passed an examination and exhibit ethical characteristics to achieve a professional certification.

Accepted Answer

A)  Internal users
B)  Fraud triangle
C)  Managerial accounting
D)  Ethics
E)  External usersF) Certified Public Accountant (CP
A)  G) Financial accountingH) AccountingI) RecordkeepingJ) D) and E)
K) D) and F)

Question 6

How does the going-concern principle affect reporting asset values of a business?

Accepted Answer

The going-concern principle means that f...

Question 7

An example of an investing activity is:

Accepted Answer

A)   Paying wages of employees.
B)   Dividends paid to stockholders.
C)   Purchase of land.
D)   Selling inventory.
E)   Investments by stockholders in exchange for common stock.F) B) and D)
G) A) and D)

Question 8

Match each of the following terms with the most appropriate definition.
-Resources a company owns or controls that are expected to yield future benefit.

Accepted Answer

A)  Assets
B)  Expenses
C)  Return on assets
D)  Accounting equation
E)  RiskF) Common stockG) DividendsH) LiabilitiesI) A) and C)
J) B) and G)

Question 9

Another name for equity is:

Accepted Answer

A)   Net income.
B)   Expenses.
C)   Net assets.
D)   Revenue.
E)   Net loss.F) A) and D)
G) D) and E)

Question 10

Speedy has net income of $18,955,and assets at the beginning of the year of $200,000.Assets at the end of the year total $246,000.Compute its return on assets.

Accepted Answer

A)   7.7%.
B)   8.5%.
C)   9.5%.
D)   11.8%.
E)   13.0%.F) A) and E)
G) A) and C)

Question 11

External users include lenders,shareholders,customers,and regulators.

Accepted Answer

A) True 
 B)False

Question 12

On May 31 of the current year,the assets and liabilities of Riser,Inc.are as follows: Cash $20,500; Accounts Receivable,$7,250; Supplies,$650; Equipment,$12,000; Accounts Payable,$9,300.What is the amount of equity as of May 31 of the current year?

Accepted Answer

A)   $49,700.
B)   $13,050.
C)   $20,500.
D)   $31,100.
E)   $40,400.F) C) and E)
G) C) and D)

Question 13

To include the personal assets and transactions of a business's stockholders in the records and reports of the business would be in conflict with the:

Accepted Answer

A)   Objectivity principle.
B)   Monetary unit assumption.
C)   Business entity assumption.
D)   Going-concern assumption.
E)   Revenue recognition principle.F) A) and C)
G) None of the above

Question 14

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 15

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located.How does this transaction affect the accounting equation for Grandmark?

Accepted Answer

A)   Assets would decrease $2,000 and liabilities would decrease $2,000.
B)   Assets would decrease $2,000 and equity would decrease $2,000.
C)   Assets would increase $2,000 and equity would increase $2,000.
D)   Assets would increase $2,000 and liabilities would increase $2,000.
E)   Liabilities would decrease $2,000 and equity would increase $2,000.F) B) and E)
G) A) and C)

Question 16

The International Accounting Standards board (IASB)has the authority to impose its standards on companies around the world.

Accepted Answer

A) True 
 B)False

Question 17

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank) to:

Accepted Answer

A)   Promote accountability and transparency in the financial system.
B)   Put an end to the notion of "too big to fail."
C)   Protect the taxpayer by ending bailouts.
D)   Protect consumers from abusive financial services.
E)   All of the choices are correct.F) B) and C)
G) None of the above

Question 18

The primary objective of financial accounting is to:

Accepted Answer

A)   Serve the decision-making needs of internal users.
B)   Provide accounting information that serves external users.
C)   Monitor and control company activities.
D)   Provide information on both the costs and benefits of looking after products and services.
E)   Know what, when, and how much product to produce.F) C) and D)
G) A) and D)

Question 19

Saddleback Company paid off $30,000 of its accounts payable in cash.What would be the effects of this transaction on the accounting equation?

Accepted Answer

A)   Assets, $30,000 increase; equity, $30,000 increase.
B)   Assets, $30,000 decrease; liabilities, $30,000 decrease.
C)   Assets, $30,000 decrease; liabilities, $30,000 increase.
D)   Liabilities, $30,000 decrease; equity, $30,000 increase.
E)   Assets, $30,000 decrease; equity $30,000 decrease.F) B) and C)
G) A) and B)

Question 20

External users of accounting information include all of the following except:

Accepted Answer

A)   Shareholders.
B)   Customers.
C)   Purchasing managers.
D)   Government regulators.
E)   Creditors.F) A) and E)
G) B) and D)

Exam 1: Accounting in Business

Match each of the following terms with the most appropriate definition. -Resources a company owns or controls that are expected to yield future benefit.

Correct AnswerverifiedShow Answer

How does the going-concern principle affect reporting asset values of a business?

Correct AnswerverifiedThe going-concern principle means that f...View AnswerShow Answer

The Superior Company acquired a building for $500,000.The building was appraised at a value of $575,000.The seller had paid $300,000 for the building 6 years ago.Which accounting principle would require Superior to record the building on its records at $500,000?

Correct AnswerverifiedShow Answer

External users of accounting information include all of the following except:

Correct AnswerverifiedShow Answer

An example of an investing activity is:

Correct AnswerverifiedShow Answer

On May 31 of the current year,the assets and liabilities of Riser,Inc.are as follows: Cash $20,500; Accounts Receivable,$7,250; Supplies,$650; Equipment,$12,000; Accounts Payable,$9,300.What is the amount of equity as of May 31 of the current year?

Correct AnswerverifiedShow Answer

Saddleback Company paid off $30,000 of its accounts payable in cash.What would be the effects of this transaction on the accounting equation?

Correct AnswerverifiedShow Answer

To include the personal assets and transactions of a business's stockholders in the records and reports of the business would be in conflict with the:

Correct AnswerverifiedShow Answer

The International Accounting Standards board (IASB)has the authority to impose its standards on companies around the world.

Correct AnswerverifiedShow Answer

External users include lenders,shareholders,customers,and regulators.

Correct AnswerverifiedShow Answer

The income statement reports all of the following except:

Correct AnswerverifiedShow Answer

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located.How does this transaction affect the accounting equation for Grandmark?

Correct AnswerverifiedShow Answer

A parcel of land is offered for sale at $600,000,is assessed for tax purposes at $500,000,is recognized by its purchasers as easily being worth $575,000,and is sold for $570,000.At what amount should the land be recorded in the purchaser's books? What accounting principle supports your answer?

Correct Answerverified$570,000.The Measurement (Cost...View AnswerShow Answer

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Correct AnswerverifiedShow Answer

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank) to:

Correct AnswerverifiedShow Answer

Speedy has net income of $18,955,and assets at the beginning of the year of $200,000.Assets at the end of the year total $246,000.Compute its return on assets.

Correct AnswerverifiedShow Answer

The primary objective of financial accounting is to:

Correct AnswerverifiedShow Answer

Match the following terms with the appropriate definition. -Accounting equation

Correct AnswerverifiedShow Answer

Another name for equity is:

Correct AnswerverifiedShow Answer

Match the following terms with the appropriate definition. -Accounting specialists that have met educational and experience requirements,passed an examination and exhibit ethical characteristics to achieve a professional certification.

Correct AnswerverifiedShow Answer

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The going-concern principle means that f...
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$570,000.The Measurement (Cost...
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