Question 1

The Financial Accounting Standards Board is a part of the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False  False

Question 2

Financial accounting provides economic and financial information for all of the following except

Accepted Answer

A)   creditors.
B)   investors.
C)   managers.
D)   other external users.E) C) and D)
F) A) and B)

Question 3

The economic entity assumption requires that the activities

Accepted Answer

A)   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 of its owners.
D)   of an entity be kept separate from the activities of its owner.E) All of the above
F) A) and D) D

Question 4

A proprietorship is a business

Accepted Answer

A)   owned by one person.
B)   owned by two or more persons.
C)   organized as a separate legal entity under state corporation law.
D)   owned by a governmental agency.E) C) and D)
F) A) and D) A

Question 5

The internal control standards applicable to Sarbanes-Oxley apply to

Accepted Answer

A)   all U.S. and international companies.
B)   U.S. and international companies listed on U.S. exchanges.
C)   International companies listed on U.S. exchanges.
D)   U.S. companies listed on U.S. exchanges.E) A) and D)
F) B) and D)

Question 6

On January 1, 2015, Cat Power Company reported stockholders' equity of $705,000. During the year, the company paid dividends of $30,000. At December 31, 2015, the amount of stockholders' equity was $825,000. What amount of net income or net loss would the company report for 2015?

Accepted Answer

A)   Net loss of $30,000
B)   Net income of $90,000
C)   Net income of $120,000
D)   Net income of $150,000E) C) and D)
F) All of the above

Question 7

Which of the following would not be considered an internal user of accounting data for the GHI Company?

Accepted Answer

A)   President of the company.
B)   Production manager.
C)   Merchandise inventory clerk.
D)   President of the employees' labor union.E) None of the above
F) B) and D)

Question 8

At October 1, Arcade Fire Enterprises reported stockholders' equity of $70,000. During October, common stock of $10,000 was issued and the company posted a net loss of $4,000. If stockholders' equity at October 31 totals $70,000, what amount of dividends were paid during the month?

Accepted Answer

A)   $0
B)   $4,000
C)   $6,000
D)   $10,000E) All of the above
F) A) and B)

Question 9

The origins of accounting are generally attributed to the work of

Accepted Answer

A)   Christopher Columbus.
B)   Abner Doubleday.
C)   Luca Pacioli.
D)   Leonardo da Vinci.E) A) and D)
F) A) and C)

Question 10

Liabilities of a company are owed to

Accepted Answer

A)   debtors.
B)   benefactors.
C)   creditors.
D)   underwriters.E) B) and C)
F) A) and B)

Question 11

The financial statement that summarizes the financial position of a company is the

Accepted Answer

A)   income statement.
B)   balance sheet.
C)   operating statement.
D)   retained earnings statement.E) C) and D)
F) A) and C)

Question 12

The assumption that the unit of measure remains sufficiently constant over time is part of the

Accepted Answer

A)   economic entity assumption.
B)   cost principle.
C)   historical cost principle.
D)   monetary unit assumption.E) None of the above
F) A) and B)

Question 13

The basic accounting equation states that Assets = Liabilities.

Accepted Answer

A) True 
 B)False

Question 14

Transactions that can be measured in dollars and cents are recorded in the financial information system.

Accepted Answer

A) True 
 B)False

Question 15

The accounting process involves all of the following except

Accepted Answer

A)   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.E) A) and D)
F) A) and B)

Question 16

Fat Possum's Service Shop started the year with total assets of $330,000 and total liabilities of $2400,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000. The net income reported by Fat Possum's Service Shop for the year was

Accepted Answer

A)   $150,000.
B)   $210,000.
C)   $240,000.
D)   $270,000.E) C) and D)
F) A) and B)

Question 17

If total liabilities decreased by $50,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

A)   $80,000 decrease
B)   $20,000 decrease
C)   $20,000 increase
D)   $80,000 increaseE) C) and D)
F) B) and C)

Question 18

Druganaut Company buys a $21,000 van on credit. The transaction will affect the

Accepted Answer

A)   income statement only.
B)   balance sheet only.
C)   income statement and retained earnings statement only.
D)   income statement, retained earnings statement, and balance sheet.E) A) and D)
F) A) and C)

Question 19

The purchase of office equipment on credit increases total assets and total liabilities.

Accepted Answer

A) True 
 B)False

Question 20

The private sector organization involved in developing accounting principles is the

Accepted Answer

A)   Feasible Accounting Standards Body.
B)   Financial Accounting Studies Board.
C)   Financial Accounting Standards Board.
D)   Financial Auditors' Standards Body.E) A) and B)
F) A) and D)

Exam 1: Accounting in Action

The Financial Accounting Standards Board is a part of the Securities and Exchange Commission.

Correct AnswerverifiedFalse

Financial accounting provides economic and financial information for all of the following except

Correct AnswerverifiedShow Answer

The economic entity assumption requires that the activities

Correct AnswerverifiedD

A proprietorship is a business

Correct AnswerverifiedA

The internal control standards applicable to Sarbanes-Oxley apply to

Correct AnswerverifiedShow Answer

On January 1, 2015, Cat Power Company reported stockholders' equity of $705,000. During the year, the company paid dividends of $30,000. At December 31, 2015, the amount of stockholders' equity was $825,000. What amount of net income or net loss would the company report for 2015?

Correct AnswerverifiedShow Answer

Which of the following would not be considered an internal user of accounting data for the GHI Company?

Correct AnswerverifiedShow Answer

At October 1, Arcade Fire Enterprises reported stockholders' equity of $70,000. During October, common stock of $10,000 was issued and the company posted a net loss of $4,000. If stockholders' equity at October 31 totals $70,000, what amount of dividends were paid during the month?

Correct AnswerverifiedShow Answer

The origins of accounting are generally attributed to the work of

Correct AnswerverifiedShow Answer

Liabilities of a company are owed to

Correct AnswerverifiedShow Answer

The financial statement that summarizes the financial position of a company is the

Correct AnswerverifiedShow Answer

The assumption that the unit of measure remains sufficiently constant over time is part of the

Correct AnswerverifiedShow Answer

The basic accounting equation states that Assets = Liabilities.

Correct AnswerverifiedShow Answer

Transactions that can be measured in dollars and cents are recorded in the financial information system.

Correct AnswerverifiedShow Answer

The accounting process involves all of the following except

Correct AnswerverifiedShow Answer

Fat Possum's Service Shop started the year with total assets of $330,000 and total liabilities of $2400,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000. The net income reported by Fat Possum's Service Shop for the year was

Correct AnswerverifiedShow Answer

If total liabilities decreased by $50,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

Correct AnswerverifiedShow Answer

Druganaut Company buys a $21,000 van on credit. The transaction will affect the

Correct AnswerverifiedShow Answer

The purchase of office equipment on credit increases total assets and total liabilities.

Correct AnswerverifiedShow Answer

The private sector organization involved in developing accounting principles is the

Correct AnswerverifiedShow Answer

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