1
Q
2. Which of the following items are fundamental qualitative characteristics of financial information ? A. Going concern and accrual accounting B. Relevance and faithful representation C. Materiality and Cost-benefits D. Assets and Liabilities
A
B
2
Q
- The accounting equation can be expressed as :
A. Assets = Liabilities – Owners’ Equity
B. Assets + Liabilities = Owners’ Equity
C. Assets – Liabilities = Owners’ Equity
D. Owners’ Equity – Assets = Liabilities
A
C
3
Q
7. During the year, EcoWash has $120,000 in revenues, $50,000 in expenses, and $4,000 in dividend payments. Shareholders’ equity changed by: A. +$66,000 B. +$70,000 C. +$74,000 D. -$66,000
A
Answer: A
Chapter: 1
Explanation: ($120,000 - $50,000 - $4,000 = $66,000)
4
Q
8. EcoWash in question 7 had a: A. Net loss of $50,000 B. Net income of $70,000 C. Net income of $66,000 D. Net income of $120,000
A
Answer: B
Chapter: 1
Explanation: ($120,000 - $50,000 = $70,000)
5
Q
- Rochester Corporation holds cash of $11,000 and owes $27,000 in accounts payable. Rochester has accounts receivable of $40,000, inventory of $34,000, and land that cost $55,000. How much are Rochester’s total assets and liabilities ?
A. $129,000 Total assets and $27,000 Liabilities
B. $27,000 Total assets and $140,000 Liabilities
C. $140,000 Total assets and $27,000 Liabilities
D. $140,000 Total assets and $93,000 Liabilities
A
Answer: C
Chapter: 1
Explanation: Total assets = ($11,000 + $40,000 + $34,000 + $55,000) Liabilities = $27,000
6
Q
10. Which item(s) is (are) reported on the Balance Sheet? A. Inventory B. Accounts Payable C. Retained earnings D. All of the above
A
D
7
Q
12. Javis Company had total assets of $340,000 and total shareholders’ equity of $130,000 at the beginning of the year. During the year assets increased by $70,000 and liabilities increased by $25,000. Shareholders’ equity at the end of the year is: A. $95,000 B. $175,000 C. $200,000 D. $155,000
A
Answer: B Chapter: 1 Explanation: Total Assets = Total Liabilities + Total Shareholders’ Equity $340,000 = X + $130,000 X =$210,000 $410,000 = $235,000 + X X= $175,000
8
Q
- Which of the following is a true statement about International Financial Reporting Standards ?
A. They are newer than US financial reporting standards
B. They require less judgement than other accounting standards
C. They have been adopted (or allowed as an alternative) by many countries and territories around the world
D. They are worse than local accounting standards as they do not understand local business conditions and practices
A
C
9
Q
- Which of the following is the most accurate statement regarding ethics as applied to decision making in accounting?
A. Ethics involves making difficult choices under pressure, and should be kept in mind in making every decision, including those involving accounting
B. Ethics has no place in accounting, since accounting deals purely with numbers
C. It is impossible to learn ethical decision making, since it is just something you decide to do or not to do
D. Ethics is becoming less and less important as a field of study in business
A
A
10
Q
- Financial statements under IFRS are NOT used
A. By investors to make investment decisions
B. By stakeholders to assess accountability of management
C. By tax authorities to decide on the amount of taxes that need to paid
D. By suppliers to decide on the credit granting decisions
A
C
11
Q
17. All of the following are characteristics of useful accounting information under the IASB Conceptual Framework EXCEPT: A. Comparability B. Relevance C. Informativeness D. Reliability
A
C
12
Q
- International Financial Reporting Standards:
A. Are accounting rules that firms can choose to follow
B. Are used by all US companies
C. Consist of a conceptual framework, individual standards and footnotes
D. Are part of the project to harmonize accounting standards across the world
A
D
13
Q
19. When information is important enough to the informed user, so that, if it was omitted or erroneous, it would make a difference in the user’s decision, it is: A. Material B. Comparable C. Timely D. Understandable
A
A
14
Q
21. Which of the following financial statements shows the net increase or decrease in cash over the period? A. Balance Sheet B. Statement of changes in equity C. Statement of cash flows D. The trial balance
A
C
15
Q
24. The amount a company expects to collect from customers appear on the: A. Statement of cash flows B. Balance sheet C. Income statement D. Statement of changes in equity
A
B
16
Q
25. The accounting assumption that states that the business, rather than its owners, is the reporting unit is the: A. Separate entity assumption B. Going concern assumption C. Stable-monetary-unit assumption D. Historical cost assumption
A
A
17
Q
26. The qualitative characteristic of financial statements that ensures that accounting information is presented in a clear and concise way so that it makes sense to users of the information is: A. Relevance B. Reliability C. Understandability D. Comparability
A
C
18
Q
- Expenses are:
A. Increases in liabilities resulting from purchasing assets
B. Increases in assets resulting from operations
C. Increases in retained earnings resulting from operations
D. Decreases in retained earnings resulting from operations
A
D
19
Q
29. On January 1, 2016, total assets for ABC Company were $125,000; on December 31, 2016, total assets were $145,000. On January 1, 2016, total liabilities were $110,000; on December 31, 2016, total liabilities were $115,000. What is the amount of the change and the direction of the change in ABC’s shareholders’ equity for 2016? A. Decrease of $15,000 B. Increase of $15,000 C. Increase of $30,000 D. Decrease of $30,000
A
Answer: B Chapter: 1 Explanation: Total assets = Total liabilities + Total shareholders’ equity January 1, 2016 $125,000 = $110,000 + SE SE = $15,000 December 31, 2016 $145,000 = $115,000 + SE SE = $30,000
20
Q
- Consider the following transactions:
I. Owners invested $8,000 cash in return for shares to begin the business
II. Company provided services for cash, $6,000
III. Company provided services on account, $4,000
IV. Company paid cash for expenses, $7,500
How much net income did the company have at the end of the period?
A. $2,500
B. $4,500
C. $6,500
D. $10,500
A
Answer: A Chapter: 1 Explanation: Net income = Revenues – Expenses $4,000 + $6,000 - $7,500 = $2,500
21
Q
- Liabilities that exist but whose exact amount is not known must be:
A. Reported in the notes to the financial statements
B. Ignored
C. Treated as a contingent liability
D. Estimated
A
D
22
Q
- To be useful, accounting information must have the following fundamental qualitative characteristics:
A. Comparability, timeliness, faithful representation and relevance
B. Understandability, timeliness, faithful representation and relevance
C. Faithful representation and relevance
D. Timeliness, faithful representation and relevance
A
C
23
Q
41. Consider the following transactions: I. Borrowed cash on note payable $80,000 II. Provided services on account, $10,000 III. Received cash from a customer as payment on account, $8,000 IV. Received a utility bill, $1,200 Total assets are increased by: A. $90,000 B. $98,000 C. $96,800 D. $88,000
A
Answer: A
Chapter: 1
Explanation:
$80,000 + $10,000 = $90,000
24
Q
42. ABC Company, a start-up company, issued shares for $80,000, purchased a building for $40,000 cash, purchased inventory for $20,000 cash, performed services for clients for $10,000 cash, and recognized a depreciation expense of $2,000. The amount of shareholders’ equity at the end of the period is: A. $88,000 B. $68,000 C. $80,000 D. $140,000
A
Answer: A
Chapter: 1
Explanation:
$80,000 + $10,000 - $2,000 = $88,000
