TEST BANK FINANCIAL ACCOUNTING 16TH EDITION BY CARL WARREN, CHRISTINE JONICK, JENNIFER SCHNEIDER

TEST BANK

,True / False

1. A merchandising business buys products from other businesses to sell to customers.
a. True
b. False
ANSWER: True

2. The role of accounting is to provide many different users with financial information to make economic decisions.
a. True
b. False
ANSWER: True

3. Accounting information users need reports about the economic activities and condition of businesses.
a. True
b. False
ANSWER: True

4. Managerial accounting information is used by external and internal users equally.
a. True
b. False
ANSWER: False

5. Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the companies where
they work.
a. True
b. False
ANSWER: False

6. Financial accounting provides information to all users, while the main focus for managerial accounting is to provide
information to the management.
a. True
b. False
ANSWER: True

,7. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
ANSWER: False

8. Some of the major fraudulent acts committed by senior executives started as what they considered to be small ethical
lapses that grew out of control.
a. True
b. False
ANSWER: True

9. A business is an organization in which basic resources or inputs, such as materials and labor, are assembled and
processed to provide outputs in the form of goods or services to customers.
a. True
b. False
ANSWER: True

10. Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.
a. True
b. False
ANSWER: False

11. Financial accounting reports are relevant only to users within the business.
a. True
b. False
ANSWER: False

12. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
b. False
ANSWER: True

13. The main objective for all business is to maximize unrealized profits.
a. True
b. False
ANSWER: False

14. The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing
entities.
a. True
b. False
ANSWER: False

15. The basic difference between manufacturing and merchandising companies is the completion level of the products
they purchase for resale to customers.
a. True
b. False
ANSWER: True

, 16. An example of an external user of accounting information is the federal government.
a. True
b. False
ANSWER: True

17. Proprietorships are owned by one owner and provide only services to their customers.
a. True
b. False
ANSWER: False

18. About 90% of the businesses in the United States are organized as corporations.
a. True
b. False
ANSWER: False

19. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
ANSWER: True

20. The cost concept is the basis for entering the purchase price into the accounting records.
a. True
b. False
ANSWER: True

21. The unit of measurement concept requires that economic data be recorded in dollars.
a. True
b. False
ANSWER: True

22. If a building is appraised for $85,000, it is offered for sale at $90,000, and the buyer pays $80,000 cash for it, the
buyer would record the building at $85,000.
a. True
b. False
ANSWER: False

23. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
ANSWER: False

24. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. True
b. False
ANSWER: False

25. Generally accepted accounting principles regulate how and what financial information is reported by businesses.