ACCT 2401 CHAPTER 1 PRACTICE TEST.| VERIFIED SOLUTION

ACCT 2401 CHAPTER 1 PRACTICE TEST.Chapter 1 110. Businesses can take the following form(s): A) Sole Proprietorship B) Common stock C) Partnership D) A and C only E) All of the above 111. A corporation: A) Is a legal entity separate and distinct from its owners. B) Is controlled by the FASB. C) Has shareholders who have unlimited liability for the acts for the acts of the corporation. D) Is the same as a limited liability partnership. E) All of the above. 112. The rules adopted by the accounting profession as guides in preparing financial statements are: A) Comprised of both general and specific principles. B) Known as generally accepted accounting principles. C) Abbreviated as GAAP. D) Intended to make information in financial statements relevant, reliable, and comparable. E) All of the above. 114. The private board that currently has the authority to establish generally accepted accounting principles is the: A) APB B) FASB C) AAA D) AICPA E) SEC 115. The principle that requires every business to be accounted for separately and distinctly from its owner or owners is known as the: A) Objectivity principle B) Business entity principle C) Going-concern principle D) Revenue recognition principle E) Cost principle 118. If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser’s books at: A) $95,000 B) $137,000 C) $138,500 D) $140,000 E) $150,000 119. 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) Realization principle C) Business entity principle D) Going-concern principle E) Revenue recognition principle 120. 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 cash-equivalent amount given in exchange is the: A) Accounting equation B) Cost principle C) Going-concern principle D) Realization principle E) Business entity principle 122. The objectivity principle: A) Means that information is supported by independent, unbiased evidence. B) Means that information can be based on what the preparer thinks is true. C) Means that financial statements should contain information that is optimistic. D) Means that a business may not reorganize revenue until cash is received. E) All of the above. 126. The Maximum Experience Company acquired a building for $500,000. Maximum Experience had an appraisal done and found that the building was easily worth $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Maximum Experience to record the building on its records at $500,000? A) Monetary unit principle B) Going-concern principle C) Cost principle D) Business entity principle E) Revenue recognition principle