Question 1

Which of the following is not true of accounting principles?

Accepted Answer

A)  Financial accountants follow generally accepted accounting principles (GAAP). 
B)  Following GAAP allows accounting information users to compare one company to another. 
C)  A new accounting principle can be adopted with stockholders approval. 
D)  The Financial Accounting Standards Board (FAS
B)  has primary responsibility for developing accounting principles. 
A)  Financial accountants follow generally accepted accounting principles (GAAP). 
B)  Following GAAP allows accounting information users to compare one company to another. 
C)  A new accounting principle can be adopted with stockholders approval. 
D)  The Financial Accounting Standards Board (FAS
B)  has primary responsibility for developing accounting principles.

Question 2

The excess of revenue over the expenses incurred in earning the revenue is called capital.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are general-purpose financial statements except:

Accepted Answer

A)  balance sheet 
B)  income statement 
C)  statement of owner's equity 
D)  cash budget 
A)  balance sheet 
B)  income statement 
C)  statement of owner's equity 
D)  cash budget

Question 4

A summary of cash flows for Lopez Wedding Planning for the year ended December 31, 2011 is shown below.
     Prepare a statement of cash flows for Lopez Wedding Planning for the year ended December 31, 2011.

Accepted Answer

The answer of A summary of cash flows for Lopez...

Question 5

Cash investments made by the owner to the business are reported on the statement of cash flows in the

Accepted Answer

A)  financing activities section 
B)  investing activities section 
C)  operating activities section 
D)  supplemental statement 
A)  financing activities section 
B)  investing activities section 
C)  operating activities section 
D)  supplemental statement

Question 6

Companies like Enron, WorldCom, and Tyco International, Ltd. have been caught in the midst of ethical lapses that led to fines, firings, and criminal and/or civil prosecution. List and briefly describe three factors that are responsible for what went wrong in these companies.

Accepted Answer

The three factors are: (1) individual ch

Question 7

All of the following statements regarding the ratio of liabilities to owner's equity are true except:

Accepted Answer

A)  A ratio of 1 indicates that liabilities equal owner's equity. 
B)  Corporations can use this ratio but substitute total stockholders' equity for total owner's equity. 
C)  The higher this ratio is, the better able a business is to withstand poor business conditions and pay creditors. 
D)  The lower this ratio is, the better able a business is to withstand poor business conditions and pay creditors. 
A)  A ratio of 1 indicates that liabilities equal owner's equity. 
B)  Corporations can use this ratio but substitute total stockholders' equity for total owner's equity. 
C)  The higher this ratio is, the better able a business is to withstand poor business conditions and pay creditors. 
D)  The lower this ratio is, the better able a business is to withstand poor business conditions and pay creditors.

Question 8

The following data were taken from Harrison Company's balance sheet:
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $150,000 $105,000
Total owner's equity 75,000 60,000
a. Compute the ratio of liabilities to owner's equity.
b. Has the creditors' risk increased or decreased from December 31, 2011, to December 31, 2012?

Accepted Answer

a. 12/31/2012: $150,

Question 9

Which type of accountant typically practices as an individual or as a member of a public accounting firm?

Accepted Answer

A)  Certified Public Accountant 
B)  Certified Payroll Professional 
C)  Certified Internal Auditor 
D)  Certified Management Accountant 
A)  Certified Public Accountant 
B)  Certified Payroll Professional 
C)  Certified Internal Auditor 
D)  Certified Management Accountant

Question 10

Jonathan Martin is the owner and operator of Martin Consultants. At December 31, 2011, Martin Consultants has assets of $430,000 and liabilities of $205,000. Using the accounting equation and considering each case independently, determine the following:
a. Jonathan Martin, capital, as of December 31, 2011.
b. Jonathan Martin, capital, as of December 31, 2012, assuming that assets increased by $12,000 and liabilities increased by $15,000 in 2012.
c. Jonathan Martin, capital, as of December 31, 2012, assuming that assets decreased by $8,000 and liabilities increased by $14,000 during 2012.

Accepted Answer

a. $430,000 - 205,000 = $225,0

Question 11

The assets and liabilities of Amos Moving Services at March 31, 2014, the end of the current year, and its revenue and expenses for the year are listed below. The capital of the owner was $180,000 at April 1, 2013, the beginning of the current year. Mr. Amos invested an additional $25,000 in the business during the year.
   Prepare a statement of owner's equity for the current year ended March 31, 2014.

Accepted Answer

The answer of The assets and liabilities of Amos Moving...

Question 12

Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where they work.

Accepted Answer

A) True 
 B)False

Question 13

Proper ethical conduct implies that you only consider what's in your best interest.

Accepted Answer

A) True 
 B)False

Question 14

The objectivity concept requires that

Accepted Answer

A)  business transactions must be consistent with the objectives of the entity 
B)  the Financial Accounting Standards Board must be fair and unbiased in its deliberations over new accounting standards 
C)  accounting principles must meet the objectives of the Security and Exchange Commission 
D)  amounts recorded in the financial statements must be based on independently verifiable evidence 
A)  business transactions must be consistent with the objectives of the entity 
B)  the Financial Accounting Standards Board must be fair and unbiased in its deliberations over new accounting standards 
C)  accounting principles must meet the objectives of the Security and Exchange Commission 
D)  amounts recorded in the financial statements must be based on independently verifiable evidence

Question 15

The Sarbanes-Oxley Act of 2002 prohibits employment of auditors by their clients for what period after their last audit of the client?

Accepted Answer

A)  Indefinitely 
B)  One year 
C)  Two years 
D)  There is no such prohibition. 
A)  Indefinitely 
B)  One year 
C)  Two years 
D)  There is no such prohibition.

Question 16

Which of the following is not an asset?

Accepted Answer

A)  Investments 
B)  Cash 
C)  Inventory 
D)  Owner's Equity 
A)  Investments 
B)  Cash 
C)  Inventory 
D)  Owner's Equity

Question 17

The assets and liabilities of S&P Day Spa at December 31, 2014 and its revenue and expenses for the year are listed below. The capital of the owner is $68,000 at December 31, 2014. The owner invested an additional $10,000 during the year.
   Determine the capital of the owner at January 1, 2014 (Hint: Calculate the increase/decrease in owner's equity first.). Prepare a statement of owner's equity for the current year ended December 31, 2014.

Accepted Answer

The answer of The assets and liabilities of S&P Day...

Question 18

The business entity concept means that

Accepted Answer

A)  the owner is part of the business entity 
B)  an entity is organized according to state or federal statutes 
C)  an entity is organized according to the rules set by the FASB 
D)  the entity is an individual economic unit for which data are recorded, analyzed, and reported 
A)  the owner is part of the business entity 
B)  an entity is organized according to state or federal statutes 
C)  an entity is organized according to the rules set by the FASB 
D)  the entity is an individual economic unit for which data are recorded, analyzed, and reported

Question 19

Which of the items below is not a business entity?

Accepted Answer

A)  entrepreneurship 
B)  proprietorship 
C)  partnership 
D)  corporation 
A)  entrepreneurship 
B)  proprietorship 
C)  partnership 
D)  corporation

Question 20

A business is an organization in where basic resources or inputs, like materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.

Accepted Answer

A) True 
 B)False

Exam 1: Introduction to Accounting and Business

Which of the following is not true of accounting principles?

The excess of revenue over the expenses incurred in earning the revenue is called capital.

All of the following are general-purpose financial statements except:

A summary of cash flows for Lopez Wedding Planning for the year ended December 31, 2011 is shown below. Prepare a statement of cash flows for Lopez Wedding Planning for the year ended December 31, 2011.

Cash investments made by the owner to the business are reported on the statement of cash flows in the

Companies like Enron, WorldCom, and Tyco International, Ltd. have been caught in the midst of ethical lapses that led to fines, firings, and criminal and/or civil prosecution. List and briefly describe three factors that are responsible for what went wrong in these companies.

All of the following statements regarding the ratio of liabilities to owner's equity are true except:

Which type of accountant typically practices as an individual or as a member of a public accounting firm?

Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where they work.

Proper ethical conduct implies that you only consider what's in your best interest.

The objectivity concept requires that

The Sarbanes-Oxley Act of 2002 prohibits employment of auditors by their clients for what period after their last audit of the client?

Which of the following is not an asset?

The business entity concept means that

Which of the items below is not a business entity?

A business is an organization in where basic resources or inputs, like materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

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