,TESTBANK for Using Financial Accounting , 1st
Edition Carl Warren
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:
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
1. The objective of most businesses is to maximize profits.
a. True
b. False
ANSWER: True
2. A limited liability company combines attributes of a partnership and a corporation.
a. True
b. False
ANSWER: True
3. A partnership is owned by two or more individuals.
a. True
b. False
ANSWER: True
4. Manufacturing businesses change basic inputs into products that are sold to individual customers.
a. True
b. False
ANSWER: True
5. Merchandising businesses produce products rather than provide services to customers.
a. True
b. False
ANSWER: False
6. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
ANSWER: True
7. The popularity of the sole proprietorship is due to the ease and low cost of organizing.
a. True
b. False
ANSWER: True
8. A primary disadvantage of corporations is that the financial resources available to them are limited.
a. True
b. False
ANSWER: False
9. The ownership of a proprietorship is divided into shares of stock owned by its stockholders.
a. True
b. False
ANSWER: False
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,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
10. All merchandising businesses are organized as corporations.
a. True
b. False
ANSWER: False
11. Stockholders of a corporation are its internal stakeholders.
a. True
b. False
ANSWER: False
12. John Deere is a leading manufacturer of agricultural machinery in the world, producing products that serve unique
market needs. Therefore, John Deere is an example of a company that uses a premium-price strategy to attract customers.
a. True
b. False
ANSWER: True
13. A business stakeholder has an interest in the economic performance of a business.
a. True
b. False
ANSWER: True
14. Companies using a low-cost strategy provide products and services that compete on features other than price.
a. True
b. False
ANSWER: False
15. The basic type of stock issued to owners is called common stock.
a. True
b. False
ANSWER: True
16. Assets are acquired through investing activities when resources are purchased.
a. True
b. False
ANSWER: True
17. Creditors have preference to assets after stockholders if a business fails.
a. True
b. False
ANSWER: False
18. A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
19. Accounting is thought to be the "language of business" because business information is communicated to stakeholders.
a. True
b. False
ANSWER: True
20. The branch of accounting related to the management's financial decisions is known as financial accounting.
a. True
b. False
ANSWER: False
21. The stockholders' equity of a company should equal the sum of its total assets and total liabilities.
a. True
b. False
ANSWER: False
22. The balance sheet represents the accounting equation.
a. True
b. False
ANSWER: True
23. What is the primary objective of most businesses?
a. To maximize profits
b. To pay dividends to stockholders
c. To provide a benefit to society
d. To manufacture a quality product
ANSWER: a
24. Which of the following businesses buys products from other businesses wholesale to sell them to customers at a retail
price?
a. A merchandising business
b. A manufacturing business
c. A service business
d. An investment business
ANSWER: a
25. Which of the following items is not a business organization form?
a. Multi-venture
b. Proprietorship
c. Partnership
d. Corporation
ANSWER: a
26. Which of the following types of organizational forms is popular for its ease of formation and low cost of organizing?
a. Not-for-profit
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,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
b. Corporation
c. Partnership
d. Proprietorship
ANSWER: d
27. Which of the following statements is true about a limited liability company?
a. It is organized under state or federal statutes as a separate legal entity.
b. Many professional practices such as lawyers, doctors, and accountants are organized as limited liability
companies.
c. Its financial resources are limited to the individual owner's resources.
d. The frequency of this form is due to the ease and low cost of organizing.
ANSWER: b
28. Under a(n) _____, a business designs products that possess unique attributes or characteristics for which customers are
willing to pay more.
a. premium-price strategy
b. outreach strategy
c. low-cost strategy
d. customer strategy
ANSWER: a
29. Which of the following is not a characteristic of a corporation?
a. Corporations are organized as a separate legal taxable entity.
b. Ownership is divided into shares of stock.
c. Corporations experience an ease in obtaining large amounts of resources by issuing stock.
d. A corporation can elect to be taxed as a partnership.
ANSWER: d
30. A corporation is an entity _____.
a. that is organized according to state or federal statutes and in which ownership is divided into shares of stock
b. that is known for its ease of formation
c. that terminates its existence with the death of the owner
d. that pays tax on the owner's tax returns
ANSWER: a
31. A low-cost strategy strives to provide _____.
a. no-frills, standardized products and services
b. products and services that provide unique market needs
c. products and services that provide prestige and image for customers
d. products and services that compete on features other than price
ANSWER: a
32. Which of the following businesses uses a premium-price strategy?
a. Value City Furniture selling furniture at affordable prices
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
b. Tommy Hilfiger selling products that have a unique image
c. Wal-Mart reselling standardized products
d. Southwest Airlines providing standardized services
ANSWER: b
33. Motel 6, a company that provides customers with budget motels across the nation, is an example of a business using
which of the following?
a. Low-cost strategy
b. Outreach strategy
c. Customer strategy
d. Premium-price strategy
ANSWER: a
34. Which of the following is considered a business stakeholder?
a. A bank
b. An employee
c. A federal government
d. All of these choices
ANSWER: d
35. _____ are an example of internal stakeholders.
a. Managers
b. Creditors
c. Stockholders
d. Suppliers
ANSWER: a
36. Which of the following is not an example of a capital market stakeholder?
a. Banks
b. Owners
c. Suppliers
d. Stockholders
ANSWER: c
37. Capital market stakeholders have an interest in a company because _____.
a. they collect taxes from the company
b. they depend upon the continued success of the company for keeping their jobs
c. they purchase the company's products or services or sell their products or services to the company
d. they provide major financing for the business
ANSWER: d
38. In the case of a failing company, the right to the first claim of the company's assets belongs to the _____.
a. state governments
b. creditors of the company
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
c. owners of the company
d. managers of the company
ANSWER: b
39. The economic performance of a business is of importance to the government because _____.
a. of potential tax collections
b. the government sells its products to the business
c. of the amount owed by the government to the business
d. All of these choices
ANSWER: a
40. The performance evaluation of the managers of a company is dependent on the company's _____.
a. common stock
b. volatility
c. economic performance
d. nonrecurring activities
ANSWER: c
41. When a business borrows money, which of the following is incurred?
a. An accumulated depletion
b. A liability
c. A loss
d. An accrued expenditure
ANSWER: b
42. Revenues received from providing services are referred to as _____.
a. fees earned
b. net income
c. gross income
d. retained earnings
ANSWER: a
43. A note payable requires payment of the amount borrowed plus _____.
a. interest
b. tax
c. overhead
d. a dividend
ANSWER: a
44. Shares of ownership are evidenced by issuing _____.
a. shares payable
b. commercial paper
c. shares of stock
d. notes payable
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
ANSWER: c
45. The resources a business owns are called _____.
a. assets
b. liabilities
c. earnings
d. stockholders' equity
ANSWER: a
46. The purchase of factory equipment would be an example of which of the following types of business activity?
a. Financing
b. Investing
c. Operating
d. All of these choices
ANSWER: b
47. Which of the following is an intangible asset?
a. Patent
b. Cash
c. Land
d. Equipment
ANSWER: a
48. Rights to payments from customers are _____.
a. liabilities
b. prepaid expenses
c. accounts receivable
d. accounts payable
ANSWER: c
49. Which of the following is considered an asset until consumed?
a. Accounts payable
b. Prepaid expense
c. Accounts receivable
d. Stockholders' equity
ANSWER: b
50. _____ is the increase in assets from selling products or providing services.
a. Revenue
b. Interest income
c. Equity
d. Cost of goods sold
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Chapter 01: The Role of Accounting in Business
51. Cash collected from sales during the normal course of business would be an example of which of the following types
of business activity?
a. Operating
b. Investing
c. Financing
d. None of these choices
ANSWER: a
52. Costs incurred to earn revenue are referred to as _____.
a. common stock
b. expenses
c. liabilities
d. retained earnings
ANSWER: b
53. Debts owed by a business are referred to as _____.
a. accounts receivable
b. equities
c. stockholders' equity
d. liabilities
ANSWER: d
54. Cash investments made by the stockholders of the business are reported on the statement of cash flows in the _____.
a. financing activities section
b. investing activities section
c. operating activities section
d. supplemental statement
ANSWER: a
55. Financing activities_____.
a. involve obtaining funds to operate a business
b. involve obtaining assets such as buildings and equipment
c. help to earn revenues and profits
d. help to make wise investments in other companies
ANSWER: a
56. Reporting the financial condition of a business at a point in time and reporting the changes in the financial condition
of a business over a period of time are the two major objectives of _____.
a. fund accounting
b. forensic accounting
c. not-for-profit accounting
d. financial accounting
ANSWER: d
Copyright Cengage Learning. Powered by Cognero. Page 8
Edition Carl Warren
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:
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
1. The objective of most businesses is to maximize profits.
a. True
b. False
ANSWER: True
2. A limited liability company combines attributes of a partnership and a corporation.
a. True
b. False
ANSWER: True
3. A partnership is owned by two or more individuals.
a. True
b. False
ANSWER: True
4. Manufacturing businesses change basic inputs into products that are sold to individual customers.
a. True
b. False
ANSWER: True
5. Merchandising businesses produce products rather than provide services to customers.
a. True
b. False
ANSWER: False
6. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
ANSWER: True
7. The popularity of the sole proprietorship is due to the ease and low cost of organizing.
a. True
b. False
ANSWER: True
8. A primary disadvantage of corporations is that the financial resources available to them are limited.
a. True
b. False
ANSWER: False
9. The ownership of a proprietorship is divided into shares of stock owned by its stockholders.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
10. All merchandising businesses are organized as corporations.
a. True
b. False
ANSWER: False
11. Stockholders of a corporation are its internal stakeholders.
a. True
b. False
ANSWER: False
12. John Deere is a leading manufacturer of agricultural machinery in the world, producing products that serve unique
market needs. Therefore, John Deere is an example of a company that uses a premium-price strategy to attract customers.
a. True
b. False
ANSWER: True
13. A business stakeholder has an interest in the economic performance of a business.
a. True
b. False
ANSWER: True
14. Companies using a low-cost strategy provide products and services that compete on features other than price.
a. True
b. False
ANSWER: False
15. The basic type of stock issued to owners is called common stock.
a. True
b. False
ANSWER: True
16. Assets are acquired through investing activities when resources are purchased.
a. True
b. False
ANSWER: True
17. Creditors have preference to assets after stockholders if a business fails.
a. True
b. False
ANSWER: False
18. A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
19. Accounting is thought to be the "language of business" because business information is communicated to stakeholders.
a. True
b. False
ANSWER: True
20. The branch of accounting related to the management's financial decisions is known as financial accounting.
a. True
b. False
ANSWER: False
21. The stockholders' equity of a company should equal the sum of its total assets and total liabilities.
a. True
b. False
ANSWER: False
22. The balance sheet represents the accounting equation.
a. True
b. False
ANSWER: True
23. What is the primary objective of most businesses?
a. To maximize profits
b. To pay dividends to stockholders
c. To provide a benefit to society
d. To manufacture a quality product
ANSWER: a
24. Which of the following businesses buys products from other businesses wholesale to sell them to customers at a retail
price?
a. A merchandising business
b. A manufacturing business
c. A service business
d. An investment business
ANSWER: a
25. Which of the following items is not a business organization form?
a. Multi-venture
b. Proprietorship
c. Partnership
d. Corporation
ANSWER: a
26. Which of the following types of organizational forms is popular for its ease of formation and low cost of organizing?
a. Not-for-profit
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
b. Corporation
c. Partnership
d. Proprietorship
ANSWER: d
27. Which of the following statements is true about a limited liability company?
a. It is organized under state or federal statutes as a separate legal entity.
b. Many professional practices such as lawyers, doctors, and accountants are organized as limited liability
companies.
c. Its financial resources are limited to the individual owner's resources.
d. The frequency of this form is due to the ease and low cost of organizing.
ANSWER: b
28. Under a(n) _____, a business designs products that possess unique attributes or characteristics for which customers are
willing to pay more.
a. premium-price strategy
b. outreach strategy
c. low-cost strategy
d. customer strategy
ANSWER: a
29. Which of the following is not a characteristic of a corporation?
a. Corporations are organized as a separate legal taxable entity.
b. Ownership is divided into shares of stock.
c. Corporations experience an ease in obtaining large amounts of resources by issuing stock.
d. A corporation can elect to be taxed as a partnership.
ANSWER: d
30. A corporation is an entity _____.
a. that is organized according to state or federal statutes and in which ownership is divided into shares of stock
b. that is known for its ease of formation
c. that terminates its existence with the death of the owner
d. that pays tax on the owner's tax returns
ANSWER: a
31. A low-cost strategy strives to provide _____.
a. no-frills, standardized products and services
b. products and services that provide unique market needs
c. products and services that provide prestige and image for customers
d. products and services that compete on features other than price
ANSWER: a
32. Which of the following businesses uses a premium-price strategy?
a. Value City Furniture selling furniture at affordable prices
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
b. Tommy Hilfiger selling products that have a unique image
c. Wal-Mart reselling standardized products
d. Southwest Airlines providing standardized services
ANSWER: b
33. Motel 6, a company that provides customers with budget motels across the nation, is an example of a business using
which of the following?
a. Low-cost strategy
b. Outreach strategy
c. Customer strategy
d. Premium-price strategy
ANSWER: a
34. Which of the following is considered a business stakeholder?
a. A bank
b. An employee
c. A federal government
d. All of these choices
ANSWER: d
35. _____ are an example of internal stakeholders.
a. Managers
b. Creditors
c. Stockholders
d. Suppliers
ANSWER: a
36. Which of the following is not an example of a capital market stakeholder?
a. Banks
b. Owners
c. Suppliers
d. Stockholders
ANSWER: c
37. Capital market stakeholders have an interest in a company because _____.
a. they collect taxes from the company
b. they depend upon the continued success of the company for keeping their jobs
c. they purchase the company's products or services or sell their products or services to the company
d. they provide major financing for the business
ANSWER: d
38. In the case of a failing company, the right to the first claim of the company's assets belongs to the _____.
a. state governments
b. creditors of the company
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
c. owners of the company
d. managers of the company
ANSWER: b
39. The economic performance of a business is of importance to the government because _____.
a. of potential tax collections
b. the government sells its products to the business
c. of the amount owed by the government to the business
d. All of these choices
ANSWER: a
40. The performance evaluation of the managers of a company is dependent on the company's _____.
a. common stock
b. volatility
c. economic performance
d. nonrecurring activities
ANSWER: c
41. When a business borrows money, which of the following is incurred?
a. An accumulated depletion
b. A liability
c. A loss
d. An accrued expenditure
ANSWER: b
42. Revenues received from providing services are referred to as _____.
a. fees earned
b. net income
c. gross income
d. retained earnings
ANSWER: a
43. A note payable requires payment of the amount borrowed plus _____.
a. interest
b. tax
c. overhead
d. a dividend
ANSWER: a
44. Shares of ownership are evidenced by issuing _____.
a. shares payable
b. commercial paper
c. shares of stock
d. notes payable
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Chapter 01: The Role of Accounting in Business
ANSWER: c
45. The resources a business owns are called _____.
a. assets
b. liabilities
c. earnings
d. stockholders' equity
ANSWER: a
46. The purchase of factory equipment would be an example of which of the following types of business activity?
a. Financing
b. Investing
c. Operating
d. All of these choices
ANSWER: b
47. Which of the following is an intangible asset?
a. Patent
b. Cash
c. Land
d. Equipment
ANSWER: a
48. Rights to payments from customers are _____.
a. liabilities
b. prepaid expenses
c. accounts receivable
d. accounts payable
ANSWER: c
49. Which of the following is considered an asset until consumed?
a. Accounts payable
b. Prepaid expense
c. Accounts receivable
d. Stockholders' equity
ANSWER: b
50. _____ is the increase in assets from selling products or providing services.
a. Revenue
b. Interest income
c. Equity
d. Cost of goods sold
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Chapter 01: The Role of Accounting in Business
51. Cash collected from sales during the normal course of business would be an example of which of the following types
of business activity?
a. Operating
b. Investing
c. Financing
d. None of these choices
ANSWER: a
52. Costs incurred to earn revenue are referred to as _____.
a. common stock
b. expenses
c. liabilities
d. retained earnings
ANSWER: b
53. Debts owed by a business are referred to as _____.
a. accounts receivable
b. equities
c. stockholders' equity
d. liabilities
ANSWER: d
54. Cash investments made by the stockholders of the business are reported on the statement of cash flows in the _____.
a. financing activities section
b. investing activities section
c. operating activities section
d. supplemental statement
ANSWER: a
55. Financing activities_____.
a. involve obtaining funds to operate a business
b. involve obtaining assets such as buildings and equipment
c. help to earn revenues and profits
d. help to make wise investments in other companies
ANSWER: a
56. Reporting the financial condition of a business at a point in time and reporting the changes in the financial condition
of a business over a period of time are the two major objectives of _____.
a. fund accounting
b. forensic accounting
c. not-for-profit accounting
d. financial accounting
ANSWER: d
Copyright Cengage Learning. Powered by Cognero. Page 8
