,TESTBANK FOR Financial Accounting, 14th edition
Wendy M. Tietz
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Financial Accounting, 14e (Thomas)
Chapter 1 The Financial Statements
Learning Objective 1-1
1) Accounting is an information system that measures business activities.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
2) Bookkeeping is a mechanical part of accounting.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
3) Accounting is often called the language of business.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
4) Accounting produces financial statements, which report information about a business.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
5) The accounting process begins and ends with people making decisions.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
6) Accounting information is used by investors and creditors, but not by regulatory bodies.
Answer: FALSE
Explanation: It is used by individuals, investors, creditors, nonprofits, and regulatory bodies.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
1
Copyright © 2025 Pearson Education, Inc.
,7) Since Habitat for Humanity is not concerned about making a profit, the entity does not need to use
accounting information.
Answer: FALSE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
8) The business records of a sole proprietorship should include the proprietor's personal finances.
Answer: FALSE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
9) A partnership is a taxpaying entity.
Answer: FALSE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
10) Stockholders have no personal obligation for the corporation's debts.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
11) Accounting:
A) measures business activities.
B) processes data into reports and communicates the data to decision makers.
C) is often called the language of business.
D) is all of the above.
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
2
Copyright © 2025 Pearson Education, Inc.
,12) A disadvantage of general partnerships is:
A) double taxation of distributed profits.
B) the partnership's assets are commingled with each partner's personal assets.
C) only individuals can be partners.
D) each partner may conduct business in the name of the entity and make agreements that legally bind all
partners.
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
13) Which of the following statements is TRUE for a limited liability company?
A) Members have unlimited liability for the debts of the business.
B) Members have limited liability for debts only up to the extent of their investment in the LLC.
C) The owners have unlimited liability for the debts of the business.
D) Members are not taxed like members of a partnership.
Answer: B
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
14) Which of the following statements is TRUE for a limited liability partnership?
A) All partners have limited liability for the debts of the partnership.
B) All the partners are considered to be limited partners.
C) The general partner has unlimited liability for the debts of the partnership.
D) The limited partners have unlimited liability for the debts of the partnership.
Answer: C
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
15) Which of the following statements is TRUE for a proprietorship?
A) Legally, a proprietorship is separate from the proprietor.
B) For accounting purposes, a proprietorship is separate from the proprietor.
C) The business records include the proprietor's personal finances.
D) All statements are correct.
Answer: B
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
3
Copyright © 2025 Pearson Education, Inc.
,16) Federal income taxes are paid by the ________ in a limited liability company.
A) company
B) limited partners only
C) general partners only
D) members
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
17) Which of the following statements is TRUE for a limited liability partnership?
A) The partnership pays no federal income taxes.
B) Only the limited partners pay federal income taxes on their shares of the partnership's profits.
C) Only the general partner pays federal income taxes on his or her share of the partnership's profits.
D) Only the members pay federal income taxes on their shares of the partnership's profits.
Answer: A
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
18) Which statement is TRUE about partnerships?
A) A partnership is a taxpaying entity.
B) General partnerships have mutual agency and limited liability.
C) Individuals, corporations, partnerships, or other types of entities can be partners.
D) A written partnership contract must exist.
Answer: C
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
19) Which of the following have unlimited liability for a company's debts?
A) owners of a corporation
B) members of a limited liability company
C) limited partners in a limited liability partnership
D) general partner in a limited liability partnership
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
4
Copyright © 2025 Pearson Education, Inc.
,20) Which of the following entities pay federal income taxes?
A) limited liability partnership
B) general partnership
C) limited liability company
D) corporation
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
21) The two types of accounting are:
A) profit and nonprofit.
B) financial and managerial.
C) internal and external.
D) bookkeeping and decision-oriented.
Answer: B
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
22) Decision makers who use accounting information include:
A) creditors.
B) the Internal Revenue Service.
C) the Securities and Exchange Commission.
D) all of the above.
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
23) Which type of business organization is larger in terms of assets, income, and number of employees?
A) proprietorship
B) partnership
C) limited-liability company
D) corporation
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
5
Copyright © 2025 Pearson Education, Inc.
,24) The owner of a ________ is personally liable for all the business's debts.
A) proprietorship
B) corporation
C) limited-liability company
D) All of the above are correct.
Answer: A
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
25) Which of the following is a TRUE statement about the characteristics of partnerships?
A) In a limited liability partnership, all partners have limited liability for the partnership's debts.
B) General partners in a general partnership have mutual agency and limited liability for the
partnership's debts.
C) Income and losses of the partnership "flow through" to the partners.
D) The partnership agreement must be in writing.
Answer: C
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
26) Owners of an LLC are called:
A) partners.
B) proprietors.
C) members.
D) stockholders.
Answer: C
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
27) Advantages of a corporation include:
A) difficulty in raising large sums of capital.
B) double taxation of distributed profits.
C) limited liability of the stockholders for the corporation's debts.
D) each stockholder can conduct business in the name of the corporation.
Answer: C
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
6
Copyright © 2025 Pearson Education, Inc.
,28) Shareholders of a corporation:
A) have limited liability for the corporation's debts.
B) can only be individuals.
C) have a personal obligation for the corporation's debts.
D) receive dividends from the corporation without having to pay tax on the distribution.
Answer: A
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
29) An important factor to consider when determining how to organize a business is that:
A) members of an LLC have unlimited liability and are taxed like members of a partnership.
B) for accounting purposes, a proprietorship is a distinct entity, separate from the proprietor.
C) partnerships are subject to double taxation.
D) a corporation is not legally distinct from its owners.
Answer: B
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
30) Accounting can be defined as:
Answer: Accounting is the information system that measures business activities, processes that
information into reports and financial statements, and communicates the results to decision makers.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
31) Five ways a business can be organized include:
Answer: Proprietorship, General Partnership, Limited-Liability Company, Limited-Liability
Partnership, and Corporation
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
7
Copyright © 2025 Pearson Education, Inc.
, 32) List and describe the decision makers who use accounting.
Answer:
i) Individuals. People like you manage their personal bank accounts, decide whether to rent an apartment
or buy a house, and calculate the monthly income and expenditures of their businesses. Accounting
provides the information people need to make these decisions.
ii) Investors and creditors. Investors and creditors provide the money to finance The Walt Disney
Company. Investors want to know how much income they can expect to earn on an investment. Creditors
want to know when and how the company is going to pay them back. These decisions also require
accounting information.
iii) Regulatory bodies. All kinds of regulatory bodies use accounting information. For example,
the Internal Revenue Service (IRS) and various state and local governments require businesses,
individuals, and other types of organizations to pay income, property, excise, and other taxes. The
Securities and Exchange Commission (SEC) requires companies with publicly traded stock to provide it
with many kinds of periodic financial reports. All of these reports contain accounting information.
iv) Nonprofit organizations. Churches, hospitals, and charities such as Habitat for Humanity and the Red
Cross base many of their operating decisions on accounting data. These nonprofit organizations also have
to file periodic financial reports with the IRS and state governments, even though they will owe no
income taxes.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
33) Your friend has started his own business printing custom t-shirts. He has really great ideas for
designs, and would like to grow his business, but needs a loan to do so. So far, he hasn't really worried
about accounting in his business and doesn't understand why he needs to start now. Help him
understand why it's important to maintain good accounting records.
Answer: Accounting is the language of business and all organizations need good accounting to make
good decisions. Any creditor considering providing your friend a loan (e.g. a bank) will want to know if
your friend can repay them. Accounting can help them understand this.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
8
Copyright © 2025 Pearson Education, Inc.
Wendy M. Tietz
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Financial Accounting, 14e (Thomas)
Chapter 1 The Financial Statements
Learning Objective 1-1
1) Accounting is an information system that measures business activities.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
2) Bookkeeping is a mechanical part of accounting.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
3) Accounting is often called the language of business.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
4) Accounting produces financial statements, which report information about a business.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
5) The accounting process begins and ends with people making decisions.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
6) Accounting information is used by investors and creditors, but not by regulatory bodies.
Answer: FALSE
Explanation: It is used by individuals, investors, creditors, nonprofits, and regulatory bodies.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
1
Copyright © 2025 Pearson Education, Inc.
,7) Since Habitat for Humanity is not concerned about making a profit, the entity does not need to use
accounting information.
Answer: FALSE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
8) The business records of a sole proprietorship should include the proprietor's personal finances.
Answer: FALSE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
9) A partnership is a taxpaying entity.
Answer: FALSE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
10) Stockholders have no personal obligation for the corporation's debts.
Answer: TRUE
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
11) Accounting:
A) measures business activities.
B) processes data into reports and communicates the data to decision makers.
C) is often called the language of business.
D) is all of the above.
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
2
Copyright © 2025 Pearson Education, Inc.
,12) A disadvantage of general partnerships is:
A) double taxation of distributed profits.
B) the partnership's assets are commingled with each partner's personal assets.
C) only individuals can be partners.
D) each partner may conduct business in the name of the entity and make agreements that legally bind all
partners.
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
13) Which of the following statements is TRUE for a limited liability company?
A) Members have unlimited liability for the debts of the business.
B) Members have limited liability for debts only up to the extent of their investment in the LLC.
C) The owners have unlimited liability for the debts of the business.
D) Members are not taxed like members of a partnership.
Answer: B
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
14) Which of the following statements is TRUE for a limited liability partnership?
A) All partners have limited liability for the debts of the partnership.
B) All the partners are considered to be limited partners.
C) The general partner has unlimited liability for the debts of the partnership.
D) The limited partners have unlimited liability for the debts of the partnership.
Answer: C
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
15) Which of the following statements is TRUE for a proprietorship?
A) Legally, a proprietorship is separate from the proprietor.
B) For accounting purposes, a proprietorship is separate from the proprietor.
C) The business records include the proprietor's personal finances.
D) All statements are correct.
Answer: B
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
3
Copyright © 2025 Pearson Education, Inc.
,16) Federal income taxes are paid by the ________ in a limited liability company.
A) company
B) limited partners only
C) general partners only
D) members
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
17) Which of the following statements is TRUE for a limited liability partnership?
A) The partnership pays no federal income taxes.
B) Only the limited partners pay federal income taxes on their shares of the partnership's profits.
C) Only the general partner pays federal income taxes on his or her share of the partnership's profits.
D) Only the members pay federal income taxes on their shares of the partnership's profits.
Answer: A
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
18) Which statement is TRUE about partnerships?
A) A partnership is a taxpaying entity.
B) General partnerships have mutual agency and limited liability.
C) Individuals, corporations, partnerships, or other types of entities can be partners.
D) A written partnership contract must exist.
Answer: C
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
19) Which of the following have unlimited liability for a company's debts?
A) owners of a corporation
B) members of a limited liability company
C) limited partners in a limited liability partnership
D) general partner in a limited liability partnership
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
4
Copyright © 2025 Pearson Education, Inc.
,20) Which of the following entities pay federal income taxes?
A) limited liability partnership
B) general partnership
C) limited liability company
D) corporation
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
21) The two types of accounting are:
A) profit and nonprofit.
B) financial and managerial.
C) internal and external.
D) bookkeeping and decision-oriented.
Answer: B
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
22) Decision makers who use accounting information include:
A) creditors.
B) the Internal Revenue Service.
C) the Securities and Exchange Commission.
D) all of the above.
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
23) Which type of business organization is larger in terms of assets, income, and number of employees?
A) proprietorship
B) partnership
C) limited-liability company
D) corporation
Answer: D
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
5
Copyright © 2025 Pearson Education, Inc.
,24) The owner of a ________ is personally liable for all the business's debts.
A) proprietorship
B) corporation
C) limited-liability company
D) All of the above are correct.
Answer: A
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
25) Which of the following is a TRUE statement about the characteristics of partnerships?
A) In a limited liability partnership, all partners have limited liability for the partnership's debts.
B) General partners in a general partnership have mutual agency and limited liability for the
partnership's debts.
C) Income and losses of the partnership "flow through" to the partners.
D) The partnership agreement must be in writing.
Answer: C
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
26) Owners of an LLC are called:
A) partners.
B) proprietors.
C) members.
D) stockholders.
Answer: C
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
27) Advantages of a corporation include:
A) difficulty in raising large sums of capital.
B) double taxation of distributed profits.
C) limited liability of the stockholders for the corporation's debts.
D) each stockholder can conduct business in the name of the corporation.
Answer: C
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
6
Copyright © 2025 Pearson Education, Inc.
,28) Shareholders of a corporation:
A) have limited liability for the corporation's debts.
B) can only be individuals.
C) have a personal obligation for the corporation's debts.
D) receive dividends from the corporation without having to pay tax on the distribution.
Answer: A
Diff: 2
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
29) An important factor to consider when determining how to organize a business is that:
A) members of an LLC have unlimited liability and are taxed like members of a partnership.
B) for accounting purposes, a proprietorship is a distinct entity, separate from the proprietor.
C) partnerships are subject to double taxation.
D) a corporation is not legally distinct from its owners.
Answer: B
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
30) Accounting can be defined as:
Answer: Accounting is the information system that measures business activities, processes that
information into reports and financial statements, and communicates the results to decision makers.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
31) Five ways a business can be organized include:
Answer: Proprietorship, General Partnership, Limited-Liability Company, Limited-Liability
Partnership, and Corporation
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
7
Copyright © 2025 Pearson Education, Inc.
, 32) List and describe the decision makers who use accounting.
Answer:
i) Individuals. People like you manage their personal bank accounts, decide whether to rent an apartment
or buy a house, and calculate the monthly income and expenditures of their businesses. Accounting
provides the information people need to make these decisions.
ii) Investors and creditors. Investors and creditors provide the money to finance The Walt Disney
Company. Investors want to know how much income they can expect to earn on an investment. Creditors
want to know when and how the company is going to pay them back. These decisions also require
accounting information.
iii) Regulatory bodies. All kinds of regulatory bodies use accounting information. For example,
the Internal Revenue Service (IRS) and various state and local governments require businesses,
individuals, and other types of organizations to pay income, property, excise, and other taxes. The
Securities and Exchange Commission (SEC) requires companies with publicly traded stock to provide it
with many kinds of periodic financial reports. All of these reports contain accounting information.
iv) Nonprofit organizations. Churches, hospitals, and charities such as Habitat for Humanity and the Red
Cross base many of their operating decisions on accounting data. These nonprofit organizations also have
to file periodic financial reports with the IRS and state governments, even though they will owe no
income taxes.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
33) Your friend has started his own business printing custom t-shirts. He has really great ideas for
designs, and would like to grow his business, but needs a loan to do so. So far, he hasn't really worried
about accounting in his business and doesn't understand why he needs to start now. Help him
understand why it's important to maintain good accounting records.
Answer: Accounting is the language of business and all organizations need good accounting to make
good decisions. Any creditor considering providing your friend a loan (e.g. a bank) will want to know if
your friend can repay them. Accounting can help them understand this.
Diff: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
8
Copyright © 2025 Pearson Education, Inc.
