Exam (elaborations) Test Bank Fundamental Accounting Principles 22nd Edition by Wild Shaw Chiappetta

TEST BANK with Complete Questions and Solutions. To clarify, this is the TEST BANK, not the textbook. You get immediate access to download your test bank. You will receive a complete test bank; in other words, all chapters will be there. Test banks come in PDF format; therefore, you do not need specialized software to open them. Exam (elaborations) Test Bank Fundamental Accounting Principles 22nd Edition by Wild Shaw Chiappetta Company usesChapter 01 Accounting in Business True / False Questions 1. Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities. True False 2. Bookkeeping is the recording of transactions and events and is only part of accounting. True False 3. An accounting information system communicates data to help users make better decisions. True False 4. Financial accounting is the area of accounting that provides internal reports to assist the decision making needs of internal users. True False 5. Internal operating activities include research and development, distribution, and human resources. True False 6. The primary objective of managerial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization's activities. True False 7. External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles. True False 8. External users include lenders, shareholders, customers, and regulators. True False 9. Regulators often have legal authority over certain activities of organizations. True False 10. Internal users include lenders, shareholders, brokers and managers. True False 11. Opportunities in accounting include auditing, consulting, market research, and tax planning. True False 12. Identifying the proper ethical path is usually easy. True False 13. The Sarbanes-Oxley Act (SOX) requires each issuer of securities to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code. True False 14. The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity, pressure, and rationalization. True False 15. The Sarbanes-Oxley Act (SOX) does not require public companies to apply both accounting oversight and stringent internal controls. True False 16. A partnership is a business owned by two or more people. True False 17. Owners of a corporation are called shareholders or stockholders. True False 18. In the partnership form of business, the owners are called stockholders. True False 19. The balance sheet shows a company's net income or loss due to earnings activities over a period of time. True False 20. The Financial Accounting Standards Board is the governmental agency that sets both broad and specific accounting principles. True False 21. The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold. True False 22. Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements. True False 23. The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners. True False 24. As a general rule, revenues should not be recognized in the accounting records when earned, but rather when cash is received. True False 25. Specific accounting principles are basic assumptions, concepts, and guidelines for preparing financial statements and arise out of long-used accounting practice. True False 26. General accounting principles arise from long-used accounting practices. True False 27. A sole proprietorship is a business owned by one or more persons. True False 28. Unlimited liability and separate taxation of the business are advantages of a sole proprietorship. True False 29. Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements. True False 30. The International Accounting Standards board (IASB) has the authority to impose its standards on companies around the world. True False 31. Objectivity means that financial information is supported by independent, unbiased evidence. True False 32. The idea that a business will continue to operate instead of being closed or sold underlies the going-concern assumption. True False 33. According to the cost principle, it is necessary for managers to report an approximation of an asset's market value upon purchase. True False 34. The monetary unit assumption means that all companies doing business in the United States must express transactions and events in U.S. dollars. True False 35. The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public. True False 36. A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation. True False 37. The Securities and Exchange Commission (SEC) is a government agency that has legal authority to establish GAAP. True False 38. The three common forms of business ownership include sole proprietorship, partnership, and non-profit. True False 39. The three major types of business activities are operating, financing, and investing. True False 40. Planning involves defining an organization's ideas, goals, and actions. True False 41. Strategic management is the process of determining the right mix of operating activities for the type of organization, its plans, and its market. True False 42. Investing activities are the means an organization uses to pay for resources like land, buildings, and equipment to carry out its plans. True False 43. Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services. True False 44. Owner financing refers to resources contributed by creditors or lenders. True False 45. Revenues are increases in equity from a company's sales of products and services to customers. True False 46. A net loss occurs when revenues exceed expenses. True False 47. Net income occurs when revenues exceed expenses. True False 48. Liabilities are the owner's claim on assets. True False 49. Assets are the resources a company owns or controls that are expected to yield future benefits. True False 50. Owner withdrawals are expenses. True False 51. The accounting equation can be restated as: Assets - Equity = Liabilities. True False 52. The accounting equation implies that: Assets + Liabilities = Equity. True False 53. Owner's investments are increases in equity from a company's earnings activities. True False 54. Every business transaction leaves the accounting equation in balance. True False 55. An external transaction is an exchange within an entity that may or may not affect the accounting equation. True False 56. From an accounting perspective, an event is a happening that affects the accounting equation, but cannot be measured. True False 57. Owner's equity is increased when cash is received from customers in payment of previously recorded accounts receivable. True False 58. An owner's investment in a business normally creates an asset (cash), a liability (note payable), and owner's equity (investment.) True False 59. Return on assets is often stated in ratio form as the amount of average total assets divided by income. True False 60. Return on assets is also known as return on investment. True False 61. Return on assets is useful to decision makers for evaluating management, analyzing and forecasting profits, and in planning activities. True False 62. Arrow's net income of $117 million and average assets of $1,400 million results in a return on assets of 8.36%. True False 63. Return on assets reflects a company's ability to generate profit through productive use of its assets. True False 64. Risk is the uncertainty about the return we will earn. True False 65. Generally the lower the risk, the higher the return that can be expected. True False 66. U.S. Government Treasury bonds provide low return and low risk to investors. True False 67. The four basic financial statements include the balance sheet, income statement, statement of owner's equity, and statement of cash flows. True False 68. An income statement reports on investing and financing activities. True False 69. A balance sheet covers activities over a period of time such as a month or year. True False 70. The income statement describes revenues earned and expenses incurred over a specified period of time due to earnings activities. True False 71. The statement of cash flows shows the net effect of revenues and expenses for a reporting period. True False 72. The income statement shows the financial position of a business on a specific date. True False 73. The first section of the income statement reports cash flows from operating activities. True False 74. The balance sheet is based on the accounting equation. True False 75. Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business. True False 76. Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or withdrawals by the owner. True False 77. The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets. True False 78. The income statement reports on operating activities at a point in time. True False 79. The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time. True False 80. Ending capital reported on the statement of owner's equity is calculated by adding owner investments and net losses and subtracting net income and withdrawals. True False Multiple Choice Questions 81. Accounting is an information and measurement system that does all of the following except: A. Identifies business activities. B. Records business activities. C. Communicates business activities. D. Eliminates the need for interpreting financial data. E. Helps people make better decisions. 82. Technology: A. Has replaced accounting. B. Has not improved the clerical accuracy of accounting. C. Reduces the time, effort and cost of recordkeeping. D. In accounting has replaced the need for decision makers. E. In accounting is only available to large corporations. 83. The primary objective of financial accounting is to: 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. 84. The area of accounting aimed at serving the decision making needs of internal users is: A. Financial accounting. B. Managerial accounting. C. External auditing. D. SEC reporting. E. Bookkeepin g. 85. External users of accounting information include all of the following except: A. Shareholder s. B. Customer s. C. Purchasing managers. D. Government regulators. E. Creditor s. 86. All of the following regarding a Certified Public Accountant are true except: A. Must meet education and experience requirements. B. Must pass an examination. C. Must exhibit ethical character. D. May also be a Certified Management Accountant. E. Cannot hold any certificate other than a CPA. 87. Ethical behavior requires that: A. Auditors' pay not depend on the success of the client's business. B. Auditors invest in businesses they audit. C. Analysts report information favorable to their companies. D. Managers use accounting information to benefit themselves. E. Auditors' pay depends on the success of the client's business. 88. The conceptual framework that the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are attempting to converge and enhance includes the following broad areas to guide standard setting except: A. Objectiv es B. Qualitative characteristics C. Uniformi ty D. Element s E. Recognition and measurement 89. All of the following are true regarding ethics except: A. Ethics are beliefs that separate right from wrong. B. Ethics rules are often set for CPAs. C. Ethics do not affect the operations or outcome of a company. D. Are critical in accounting. E. Ethics can be difficult to apply. 90. The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is: A. Business entity assumption. B. Revenue recognition principle. C. Going-concern assumption. D. Time-period assumption. E. Objectivity principle. 91. A corporation is: A. A business legally separate from its owners. B. Controlled by the FASB. C. Not responsible for its own acts and own debts. D. The same as a limited liability partnership. E. Not subject to double taxation. 92. The independent group that is attempting to harmonize accounting practices of different countries is the: A. AICPA. B. IASB . C. CAP. D. SEC. E. FASB. 93. The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the: A. APB . B. FASB. C. AAA . D. AICPA. E. SEC. 94. The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the: A. Time-period assumption. B. Business entity assumption. C. Going-concern assumption. D. Revenue recognition principle. E. Cost principle. 95. The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the: A. Going-concern assumption. B. Business entity assumption. C. Objectivity principle. D. Cost Principle. E. Monetary unit assumption. 96. If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at: A. $95,00 0. B. $137,00 0. C. $138,50 0. D. $140,00 0. E. $150,00 0. 97. To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the: A. Objectivity principle. B. Monetary unit assumption. C. Business entity assumption. D. Going-concern assumption. E. Revenue recognition principle. 98. The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cashequivalent amount given in exchange, is the: A. Accounting equation. B. Cost principle. C. Going-concern assumption. D. Realization principle. E. Business entity assumption. 99. The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the: A. Going-concern assumption. B. Cost principle. C. Revenue recognition principle. D. Objectivity principle. E. Business entity assumption. 100 . The question of when revenue should be recognized on the income statement according to GAAP is addressed by the: A. Revenue recognition principle. B. Going-concern assumption. C. Objectivity principle. D. Business entity assumption. E. Cost principle. 101 . The International Accounting Standards Board (IASB): A. Hopes to create harmony among accounting practices of different countries to improve comparability. B. Is the government group that establishes reporting requirements for companies that issue stock to the investing public. C. Has the authority to impose its standards on companies around the world. D. Is the only source of generally accepted accounting principles (GAAP). E. Only applies to companies that are members of the European Union. 102 . 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? A. Monetary unit assumption. B. Going-concern assumption. C. Cost principle. D. Business entity assumption. E. Revenue recognition principle. 103 . On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the